Euro zone lending growth unexpectedly weak in June

Lending to euro zone non-financial corporations slowed to 2.1% last month

Lending to households grew by 2.6 per cent in June

Lending to households grew by 2.6 per cent in June


Growth in bank lending was unexpectedly weak in June, European Central Bank data showed on Thursday, a potentially worrying sign for policymakers even if a one-off factor may have contributed to the slowdown.

Lending to euro zone non-financial corporations slowed to 2.1 per cent in June from 2.5 per cent in May, when it hit its best level since the start of the 19-member currency union’s debt crisis nearly a decade ago.

While the ECB does not put much weight on single data points, the slowdown may worry policymakers as lending growth is still only half of the pre-crisis rate and the rebound was considered one of the best indicators of the effectiveness of the bank’s ultra easy monetary policy.

“The decline in the annual growth rate of loans to non-financial corporations in June reflects to a significant extent intragroup transactions,” the ECB said about the data.

Lending to households meanwhile grew by 2.6 per cent in June, unchanged from the previous month when it hit its highest pace since March 2009.

“Overall, the increase of €5 billion (in lending) is the smallest in just over 2 years,” JPMorgan economist Greg Fuzesi said in a note.

“We would be cautious, however, in putting much weight on this as the data can be revised, as a rebound in July is certainly possible and because there is nothing in other indicators to suggest weaker bank lending.”

“In particular, business surveys show strong economic growth and the latest ECB bank lending survey showed a further easing in bank lending standards and firm loan demand,” he added.

Indeed, the euro zone economy is growing for the 17th straight quarter and fresh indicators, such as PMI data earlier this week or German consumer sentiment figures out on Thursday suggest that the expansion is broadening.

The ECB added that the annual growth rate of the M3 measure of money circulating in the euro zone, which has in the past often predicted economic activity, rose to 5 per cent last month from 4.9 per cent in May.