Bert Colijn, Senior Economist at ING, notes that the Eurozone growth in loans to households increased to 2.2% YoY in January, while loan growth to non-financial corporates remained at 2.3% YoY.
“Improved lending growth underpins the current strength in the Eurozone economy, although it does not seem strong enough to sway the ECB towards an earlier exit from QE.”
“While lending increased again in January, growth is still well below rates seen before the crisis. In January, it was mainly growth in credit for consumption that boosted the overall growth rate. It increased from 3.9% YoY in December to 4.1% YoY in January. This bodes well for consumption growth in the months ahead, confirming that domestic demand is likely to remain a strong driver of Eurozone growth in the first quarter. Growth in loans for house purchases was stable at 2.7% YoY, indicating that the recovery of the housing market maintains its pace for the moment. Businesses also saw loan growth stagnate, with loans for up to 1 year declining in popularity and longer term loans seeing stronger growth.”
“The current recovery in lending is no doubt related to the current loose monetary policy of the ECB. The cost of borrowing has come down to historical lows for both households and businesses, which in part drives the recovery of lending in the Eurozone. Still, with lending growth well below pre-crisis levels for the moment, it seems unlikely that the ECB will take as an argument to make changes to the QE program set out for 2017. Economic growth is picking up in the Eurozone for the moment and accelerating loan growth is underpinning that for the moment. This means that GDP growth may well have further upside in the coming months although political uncertainty continues to loom.”
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