Teunis Brosens, Senior Economist at ING, notes that the unchanged headline 1.9% year-on-year bank lending growth conceals the fact that the Eurozone bank lending growth has been weakening in recent months but it's too early to draw definite conclusions though.
“The ECB today reported unchanged year-on-year growth rates for Eurozone bank lending to households and businesses in September, for the third month in a row. It might be considered a relief that, despite the Brexit shock, bank lending has continued to grow since June.
Yet scratch beneath the surface and the picture is less benign. Monthly loan flows, though volatile, appear to be on a downward trend recently. The chart below shows the monthly flows and the main country contributions. Since June, loan growth has been weakening especially in France, which has acted as the engine of loan growth in recent years. But Italy and Spain show a weakening in monthly flows too, compared with earlier this year.
Bank lending is volatile on a monthly basis so it is too early to draw any conclusions based on a weakening that may still turn out temporary. Yet today's data warrants close monitoring of bank lending developments in the months ahead. Especially since growth of M1, usually a good cyclical indicator, continues to weaken as well (falling to 8.5% in September from 8.9% previously and 11.5% a year earlier). Eurozone GDP growth may be starting to face some headwinds.”
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