October sa M3: +1.0% y/y
M3 sa 3-mo avg: +1.1% y/y
SA private loans: +1.4% y/y

MNI survey median:
October sa M3: +1.4% y/y
M3 sa 3-mo avg: +1.1% y/y
SA private loans: +1.6% y/y

MNI survey range:
October sa M3: +1.1% to +1.7% y/y
M3 sa 3-mo avg: +1.1% to +1.3% y/y

September sa M3: +1.1% y/y
M3 sa 3-mo avg: +0.8% y/y
SA private loans: +1.2% y/y
—

FRANKFURT (MNI) – Contrary to analysts’ forecasts, Eurozone M3
money supply growth slowed slightly in October and private sector
lending picked up less than generally expected, according to seasonally
adjusted data released Friday by the European Central Bank.

In the 12 months to October, the money supply rose 1.0% to E9.475
trillion. On the month, M3 declined by E28 billion.

“Overall developments in M3 continue to reflect the steepness of
the yield curve,” the ECB said in its latest monthly bulletin.

“However, the large-scale reallocation of funds from instruments
within M3 to financial assets outside M3 appears to have waned in recent
months, as the yield curve has flattened slightly since the beginning of
the year.”

The M3 growth figure continued to mask diverging trends in its main
components. Annual M1 growth slowed to 4.9% from 6.2% in September. The
annual decline in short-term deposits other than overnight deposits
eased to 1.2% from 2.8%. The annual decline in marketable instruments
increased to 7.4% in October from 5.3%.

While M3 annual growth remained well below the ECB’s guideline of
4.5%, base effects stemming from declines in the latter half of 2009 and
early this year should lift the annual growth figure in the near term,
barring any significant future contractions.

Looking at the main counterparts of M3, annual growth of total
credit granted to euro area residents increased to 3.0% in October from
2.1% in September. Growth of credit extended to governments accelerated
to 12.0% from 7.3%.

Annual growth of credit extended to the private sector accelerated
to 1.0% from 0.9% in September. Growth of loans to the private sector
increased to 1.4% from 1.2%. (Adjusted for loan sales and
securitisation, the annual rise was 1.6% after 1.3%.)

Loans to non-financial corporations were down 0.6% on the year,
unchanged from September.

“The annual growth of loans to non-financial corporations is
actually expected to turn positive in the last quarter of 2010,” ECB
Executive Board member Gertrude Tumpel-Gugerell said earlier this week.

Last month, the respondents to the ECB’s bank lending survey
reported that net demand for bank loans had rebounded in 3Q and
projected that demand would stay positive and could even increase in 4Q.

With fewer banks reporting tighter credit standards in 3Q and the
rate of net new tightening expected to stabilize in 4Q, loan growth to
non-financial corporates is likely to remain positive in the near term.

Growth of loans to households picked up to 2.9% from 2.8%, thanks
to a 3.6% rise in mortgage lending, up from 3.4% in September. Consumer
credit was down 0.8% on the year after -0.9%. Growth of other lending to
households slowed to 2.8% from 2.9%.

–Frankfurt newsroom +49 69 720 142; e-mail:frankfurt@marketnews.com —

[TOPICS: M$$EC$,M$X$$$,M$XDS$,MT$$$$]