Aug sa M3: +2.9% y/y
M3 sa 3-mo avg: +3.2% y/y
SA private loans: -0.6% y/y

MNI survey medians:

Aug sa M3: +3.4% y/y
SA private loans: -0.3% y/y

MNI survey ranges:
Aug sa M3: +2.9% to +4.1% y/y
SA private loans: -0.3% to -0.2% y/y

July sa M3: +3.8% y/y
M3 sa 3-mo avg: +3.4% y/y
SA private loans: +0.1% y/y

—

FRANKFURT (MNI) – Eurozone private sector loan growth fell sharply
in the year through August, the fourth decline in as many months after a
downward revision to the July figure, while M3 broad money supply growth
slowed to +2.9%, the European Central Bank reported on Thursday.

Loans to the private sector fell 0.6% on the year from a downwardly
revised -0.4% the previous month, pushing down overall private sector
credit to -1.2% after -0.9% in July.

MNI’s median survey of analysts had expected a 0.3% decline in
private sector loans for August. Adjusting for sales and securitisation,
private sector loans were still down 0.2% after +0.1% in July.

Household loans were up 0.2% on the year after a 0.3% rise in July,
with mortgages – the most important component – unchanged at +0.8% on
the year.

Loans extended to non-financial corporations fell E10 billion on
the month, resulting in an annual rate of -0.8%, down from July’s -0.4%.

Loan growth is likely to remain subdued in the near term, as
capital constraints for banks and financial market segmentation hinder
credit supply.

Should the ECB decide to apply a negative rate on its deposit
facility, banks could feel a stronger incentive not to simply park money
at the central bank.

However, the option of a negative rate seems less likely based on
recent comments from a number of Governing Council members. Furthermore,
such an option would do little to address credit demand, which should
remain weak on the back of rising economic uncertainty and a worsening
outlook.

Broad money (M3) was up 2.9% on the year in August, the rate down
sharply from 3.6% in July, leaving the three month moving average at
+3.2%, well below the ECB’s guideline of +4.5%.

Over the same period, narrow money (M1) rose 5.1% after +4.5% in
July, while short-term deposits other than overnight deposits fell to
+0.8% from +2.2% the previous month. Marketable instruments fell to
-0.5% from a downwardly revised +4.3% in July.

–Frankfurt newsroom +49 69 720 142; e-mail: ccermak@mni-news.com

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