Eurozone lending and inflation data signal meagre expansion

LENDING and inflation in the Eurozone showed little sign of recovery in May and June, according to figures published yesterday.

Inflation held at 0.5 per cent in June, the same figure as in May and the joint-lowest since a brief period in 2009. Prices are rising far more slowly than the European Cental Bank (ECB) policy target for two per cent growth per year.

Loans to the private sector fell by another two per cent in the currency union during May, according to the ECB. Lending in the Eurozone has not increased since April 2012.

The Eurozone’s M3 growth, a measure of the money supply, suggested a small improvement, rising one per cent against the 0.7 per cent increase in April. But growth is far below the 4.5 per cent annual increases that the ECB used to target.

“Today’s money supply and inflation data are broadly in line with expectations – that is, weak on both fronts. Stagnating industrial prices and ongoing contraction in the stock of credit outstanding to firms underline our view that although Eurozone activity is recovering, we remain short of a self-sustaining cycle,” said Tom Rogers, economic adviser to EY.