Danske Research Team
Danske Bank A/S
Euro area M3 money supply continued to improve and was a bit above consensus at 3.6% y/y in December after increasing 3.1% y/y in November. It is now increasing at the fastest pace since November 2012.
M1 money supply increased 7.8% y/y in December up from 6.9% y/y in November. In real terms it is a good leading indicator for economic activity and it now suggests GDP growth above 0.5% q/q at the beginning of H2.
Loans to the private sector increased for the first time since July 2012 (note it is the figure adjusted for sales and securitisation).
Loans to households (adjusted for sales and securitisation) increased 0.8% y/y in December up from 0.7% y/y in November. This reflected a monthly increase of EUR2bn down from EUR5bn in November.
Loans to non-financial corporations (adjusted for sales and securitisation) declined 1.0% y/y after declining 1.4% in November. There was a positive monthly flow of EUR11bn, which is the highest since September 2011.
The progress should continue going forward as the latest bank lending survey showed that demand for credit and loans continued to increase. In our view, this is important for higher credit growth as supply-side constraints are limited after the ECB’s Asset Quality Review and Stress test revealed limited capital shortfalls.
Added to this the ECB’s QE programme should contribute to cheaper and more accessible credit to the private sector.
Overall, the progress in lending to the private sector supports our view of higher growth in the euro area. We expect GDP growth of 1.5% in 2015, which is above consensus of 1.1%.
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