Continued recovery of credit impulse in the Eurozone against a backdrop of falling interest rates

After becoming positive again in August 2024, the private sector credit impulse in the Eurozone continued to recover in September, hitting its highest level in nearly two years (November 2022). Among other factors, it contributed to the pleasant surprise in terms of the development of Eurozone GDP in the third quarter (+0.4% q/q after +0.3% in the first and +0.2% in the second). Credit impulse to non-financial corporations has recovered more quickly since dipping below credit impulse to households in autumn 2023, when the restrictive effects of monetary policy peaked. The impulse of lending to households remained slightly negative in September.

Credit impulse in the Eurozone:

Bank lending to the private sector and GDP rally in tandem in 2024

Real GDP and outstanding loans have been rallying simultaneously since the beginning of 2024. Activity resurged above expectations in the third quarter of 2024 (+0.9% year-on-year, after +0.5% in Q1 and +0.6% in Q2), due to the ultimately positive figure recorded in Germany, buoyed by consumption. At the same time, outstanding loans to the private sector continued the slight acceleration that had begun at the start of 2024 (+1.6% year-on-year in September compared to +0.4% in January). However, these developments were largely due to loans to the non-banking financial sector, with outstanding loans to households and non-financial corporates displaying more modest growth (+0.7% and +1.1% in September, respectively).

Credit standards: unchanged for businesses, eased for home loans and tightened for consumer loans

The 156 banks surveyed by the ECB between 6 and 23 September as part of its Bank Lending Survey (BLS) ultimately kept the criteria for granting corporate loans unchanged in the third quarter of 2024, despite anticipating a slight tightening in the previous survey. At the same time, they relaxed the conditions for granting home loans more than they envisaged due to increased competition. The credit standards for granting consumer loans, on the other hand, were tightened due to the increased perceived risk.

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