Danske Research Team
Danske Bank A/S
Euro area bank lending and money supply continue to improve as the ECB’s monetary policy easing has resulted in cheaper and more accessible bank lending. This is supporting activity in the euro area and the figures released today continue to signal that the recovery will gain momentum in H2.
Growth in M3 money supply remained unchanged at 5.0% y/y, whereas growth in M1 continued to rise to 11.8% in June from 11.2% in May. Real M1 growth is a good leading indicator for GDP growth in the euro area and it indicates activity will strengthen and increase towards 0.8% q/q growth at the end of H2.
Together with the effective euro, real M1 growth suggests the composite PMI new orders index for the euro area will increase significantly in H2.
Lending to the private sector continued to improve on the back of the ECB’s easing. Loans to households (adjusted for sales and securitisations) increased 1.7% y/y in June from 1.4% in May due to a positive monthly loan flow of EUR15bn in June, up from EUR10bn in May. This is the highest monthly loan flow to households since May 2011.
Growth in loans to non-financial corporations (adjusted for sales and securitisations) was 0.1% y/y again in June, but the monthly loan flow continued to improve slightly as it was EUR3bn in June up from EUR2bn in May.
The lending figures are likely to continue to improve as the latest Bank Lending Survey showed that demand for credit and loans is still increasing. This partly reflect the very low costs of borrowing for households and non-financial corporations, which have not increased despite the higher bond yields.
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