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Oct 27, 2015
EUR: Eurozone credit to non-financial business abates - ING
FXStreet (Delhi) – Teunis Brosens, Research Analyst at ING, note that credit to Eurozone businesses fell back in September to 0.1%YoY, down from 0.4%YoY in August (net bank lending adjusted for sales and securitisation).
Key Quotes
“This is disappointing: business credit had just turned positive a few months ago after three years of deleveraging. The failure of business credit to accelerate further sheds doubt on the continuing positive signals sent by soft indicators such as PMIs. Moreover, it seems at odds with last week’s Bank Lending Survey, where banks reported increasing demand for business loans.”
“Bank lending to households continued to accelerate however, reaching 1.2%YoY in September. Low rates, solid consumer confidence and housing optimism underpin mortgage lending in many Eurozone countries.”
“Credit developments continue to diverge markedly between countries. France (+3.5%YoY) and Belgium (+5.5%YoY) continue to see solid credit growth to both businesses and households. Developments in Germany are more moderate, although bank lending to households is gathering momentum (+2.5%YoY in September). Net bank lending in the Netherlands is still negative, although housing optimism has returned. In Portugal, Spain and Ireland, deleveraging is still in full swing. In Italy however, deleveraging is slowly drawing to a close.”
“Meanwhile, Eurozone M3-growth remained strong at 4.9%YoY (down from 5.0%). More important for the real economy is the fact that M1-growth is holding well at 11.8%YoY. M1 is one of the best leading indicators of the Eurozone business cycle, and its ongoing strength suggests that current consumption growth could well extend for at least another two quarters.”
“Overall, today’s M3-report shows a slowly but steadily improving credit environment in the Eurozone. The faltering of bank credit to non-financial business is an important dissonant however, and one that is not yet mirrored in other indicators. This may be a glitch, so we’ll be closely watching next month. In any case, it seems difficult to point at this report, with its strong M1-growth, as convincing justification for further monetary easing in December. For that, ECB-president Draghi will have to look elsewhere.”
Key Quotes
“This is disappointing: business credit had just turned positive a few months ago after three years of deleveraging. The failure of business credit to accelerate further sheds doubt on the continuing positive signals sent by soft indicators such as PMIs. Moreover, it seems at odds with last week’s Bank Lending Survey, where banks reported increasing demand for business loans.”
“Bank lending to households continued to accelerate however, reaching 1.2%YoY in September. Low rates, solid consumer confidence and housing optimism underpin mortgage lending in many Eurozone countries.”
“Credit developments continue to diverge markedly between countries. France (+3.5%YoY) and Belgium (+5.5%YoY) continue to see solid credit growth to both businesses and households. Developments in Germany are more moderate, although bank lending to households is gathering momentum (+2.5%YoY in September). Net bank lending in the Netherlands is still negative, although housing optimism has returned. In Portugal, Spain and Ireland, deleveraging is still in full swing. In Italy however, deleveraging is slowly drawing to a close.”
“Meanwhile, Eurozone M3-growth remained strong at 4.9%YoY (down from 5.0%). More important for the real economy is the fact that M1-growth is holding well at 11.8%YoY. M1 is one of the best leading indicators of the Eurozone business cycle, and its ongoing strength suggests that current consumption growth could well extend for at least another two quarters.”
“Overall, today’s M3-report shows a slowly but steadily improving credit environment in the Eurozone. The faltering of bank credit to non-financial business is an important dissonant however, and one that is not yet mirrored in other indicators. This may be a glitch, so we’ll be closely watching next month. In any case, it seems difficult to point at this report, with its strong M1-growth, as convincing justification for further monetary easing in December. For that, ECB-president Draghi will have to look elsewhere.”