The ECB survey warning on weak Eurozone private investment
|The ECB Bank Lending survey, conducted in March, shows tighter credit standards and weaker loan demand from firms in the first quarter of 2025. This translates into weak investment appetite, even ahead of trade and market turmoil.
While loan growth has continued to steadily increase on the back of easing monetary policy, the bank lending survey in the fourth quarter of last year already showed that banks were tightening credit standards for firms on the back of higher perceived risks. This continued in the first quarter of 2025, and loan demand for firms has also fallen back into negative territory. The latter was mainly due to smaller demand for drawing credit lines for firms and working capital. The good news there is that fixed investment plans did not contribute to weaker loan demand, although they didn’t add positively either.
The survey has been conducted mid-March, so before “liberation day” and the current market turmoil, so we don’t yet know what further effect this may have had on loan demand and banks’ eagerness to lend. Overall though, private investment expectations have been weak for the months ahead and this survey confirms expectations of a sluggish recovery despite ECB easing.
The big exception remains the mortgage market. Net demand for mortgages increased strongly again in 1Q while credit standards eased. This adds more fuel to the housing market recovery and shows that housing investment is set to be a bright spot among other sluggish investment categories in the eurozone in the months to come. Lower rates are the most important driver of increased demand according to the survey.
The subdued message from the bank lending survey should encourage the ECB to lower rates further, as if they didn’t have enough reasons to do so. With trade and market turmoil, a stronger euro and growth concerns, we expect the ECB to lower rates by 0.25% again on Thursday.
Read the original analysis: The ECB survey warning on weak Eurozone private investment
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.