March sa M3: +3.2% y/y
M3 sa 3-mo avg: +2.8% y/y
SA private loans: +0.6% y/y

MNI survey median:
March sa M3: +2.8% y/y
M3 sa 3-mo avg: +2.7% y/y
SA private loans: +2.6% y/y

MNI survey range:
March sa M3: +2.4% to +3.2% y/y
M3 sa 3-mo avg: +2.3% to +2.8% y/y

February sa M3: +2.8% y/y
M3 sa 3-mo avg: +2.3% y/y
SA private loans: +0.8% y/y
—

FRANKFURT (MNI) – Contrary to expectations, private sector lending
in the Eurozone slowed further in March to its weakest pace since
mid-2010, while M3 broad money supply surprised to the upside, the
European Central Bank reported on Monday.

Loans to the private sector were 0.6% higher on the year after
slowing to +0.8% in February, bringing the three-month moving average to
+0.9%. Adjusting for sales and securitisation, the annual rise was
steady at 1.2%.

Household credit picked up speed to +1.8%, 0.4 percentage point
higher than February’s rate. Credit to governments jumped 7.3% on the
year after +5.6% in February. Credit extended to the private sector
accelerated slightly to +0.5% from February’s +0.4%.

Loans to households slowed to +0.6% — half the annual growth in
February. Lending for house purchases – the most important component of
consumer borrowing – slowed to +1.1% in March from +1.8% previously.

Loans to non-financial corporations also decelerated, slipping to
+0.3% from February’s +0.6% rate. Monthly flows showed a drop of E5
billion after -E2 billion in February.

M3 money supply in March was 3.2% higher on the year, its strongest
rise since June 2009. As a result, the three-year moving average
increased to +2.8%, still well below the ECB’s guideline of +4.5%.

Narrow money (M1) picked up speed to +2.7%, while short-term
deposits other than overnight deposits rose 3.3% on the year. Compared
to March 2011, marketable instruments were up 5.1%.

The ECB’s latest bank lending survey suggests that demand for
credit fell sharply in 1Q, even though banks tightened lending
conditions much less than in 4Q, thanks largely to the central bank’s
generous liquidity injections.

Weak demand rather an inability of banks to lend will likely remain
the main reason for the slow growth of private sector lending over the
next few months, the ECB argues.

“While survey data and model-based estimates indicate that loan
supply factors are likely to continue to exert an adverse impact on loan
growth in the next few months, weak loan demand will probably remain the
main determinant,” the ECB said in its latest Monthly Bulletin.

“Leading indicators suggest that demand for loans on the part of
both households and non-financial corporations is likely to remain weak,
at least during the first half of 2012, in line with subdued economic
activity.”

Although credit constraints appear to be easing overall, another
ECB survey showed that access to credit for small and medium-sized
enterprises continued to deteriorate from October to March, while
external financing needs increased.

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

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