ECB bank lending survey shows no material impact of higher uncertainty

Global uncertainty hasn't affected loan demand or credit standards too much in the second quarter, which means that the outlook for investment is not currently deteriorating. Then again, this still gives us a view of investments muddling through.

Global uncertainty has increased significantly in recent months, but the European Central Bank's lending survey does not indicate a material drop in borrowing appetite among businesses or consumers. Banks are also not tightening credit standards significantly on the back of it.

In fact, loan demand from corporates shows a small improvement, and expectations for the current quarter are again modestly better than they were for the second quarter. The breakdown of the four major economies shows that Germany and Italy see improvements in loan demand, while France sees a notable decline. Loan demand for fixed investments is not contributing positively to total loan demand, though, which is mainly because of a drop in France.

For households, there continues to be a sharp increase in loan demand as the housing market continues to show strength. Households consider the level of interest rates favourable and think housing market prospects are positive. This adds to housing market strength for the months ahead.

For the ECB, this adds to the view that there is no urgency for a July cut. The central bank can take the summer off and see how the economy, inflation and geopolitical drivers of both develop. With all the uncertainty in the economy, that will be a relief to the Governing Council.

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