Consumer and Business Lending in Eurozone Grows Slowly, Steadily
September 27 2016 - 6:40AM
Dow Jones News
FRANKFURT—Lending to eurozone households and businesses grew at
a steady rate in August, data from the European Central Bank showed
Tuesday. The data suggest that while underlying trends in both loan
growth and money supply remain conducive to growth, there are
limits to the extent to which the ECB can boost output with its
monetary policy tools.
Lending to households grew by 1.8% on the year, matching the
previous month, while lending to firms grew by 1.9%, also matching
the previous month.
"This indicates that uncertainty has caused businesses and
consumers to be a little more risk-averse in August, putting a dent
in the recovery of loan growth and putting pressure on GDP growth
in the third quarter," said Bert Colijn, a senior economist at
ING.
The ECB is hoping that its generous monetary policy, which
includes large-scale asset purchases and loans to banks designed to
motivate them to lend on to the eurozone economy, will revive
lending in the currency bloc.
Mr. Colijn said, however, that despite the bond-purchase program
"the growth in eurozone borrowing remains rather weak, though,
showing only limited impact of the program thus far."
The central bank's broad money supply indicator M3 grew by 5.1%
on the year in August, beating analysts' expectations in a Wall
Street Journal survey of 4.9%.
In monthly terms, lending to households grew by €7 billion in
August, after €9 billion in the previous month, while lending to
firms declined by €1 billion in August, after €11 billion growth.
"In our view, the broader trend in the data remains positive," said
J.P. Morgan economist Greg Fuzesi.
ECB President Mario Draghi said Monday that the transmission of
monetary policy to the real economy is working at the present time.
Speaking in Brussels, the ECB chief said that the "transmission of
policy never worked better than it does today."
The data aren't likely to sway the ECB from an additional
expansion of its policy near the end of the year, say analysts.
"The August lending and money supply data will likely do little to
change belief that the ECB is set to sit tight at its October
meeting but could well enact some modest further stimulus in
December," said Howard Archer of IHS Markit in a note. "It looks
unlikely that the ECB will act before December given that it
indicated at its September meeting that it is pretty firmly in
'wait-and-see mode,'" he added.
The central bank's narrow money supply measure M1, which
includes currency in circulation and overnight deposits, stood at
8.9% annual growth in August after 8.4% in July. This points to
"solid growth momentum in the economy," said Mr. Fuzesi.
Write to Todd Buell at todd.buell@wsj.com
(END) Dow Jones Newswires
September 27, 2016 06:25 ET (10:25 GMT)
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