Lending to Eurozone households climbs at fastest rate since 2011 as money supply growth remains robust

Chris Papadopoullos
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Lending to Eurozone households and businesses gained momentum in February, according to figures published by the European Central Bank this morning.

The money supply also continued to grow at a robust rate, an indication stronger demand is on the way.

Household borrowing from banks climbed by 1.6 per cent in February compared with the same month last year – the fastest rate of household credit growth since 2011.

Companies are also enjoying a spell of easier credit conditions, with lending to non-financial companies rising 0.9 per cent – also the highest annual growth rate since 2011. Total private sector lending rose by 0.9 per cent.

The M3 money supply, which counts the euros in the bank accounts of Eurozone households and businesses as well as notes and coins, climbed five per cent.

The recent rebounds in credit and money supply growth follow aggressive action from the European Central Bank (ECB). It has cut interest rates below zero, offered cheap long-term loans to banks, and started purchasing assets at a rate of €80bn (£63bn) a month to inject more money into the economy.

"For the Eurozone, old-fashioned monetary analysis still carries a clear message today: the ECB is finally pursuing the right policy. At five per cent, annual growth in M3 broad money supply held steady in February 2016. From mid-2009 to February 2015, M3 growth had averaged just 1.8 per cent, far below what the Bundesbank had long regarded as the appropriate norm," said Holger Schmieding, chief economist at Berenberg Bank.

"No wonder that domestic demand in the Eurozone had been extremely weak for years, held back by a monetary policy that had been less aggressive than that of the US Fed and more timid than would have been required to keep core inflation closer to two per cent."