European lending and money supply still weak

GROWTH of broad money in the Eurozone sharply fell in October to a record low of 0.3 per cent year-on-year, while lending to non-financial firms remained firmly in negative territory last month. <br /><br />Base effects saw private sector lending growth fall to -0.8 per cent from -0.3 per cent in September, entirely driven by the steep fall in lending to non-financial firms of -1.2 per cent from -0.2 per cent.<br /><br />Both money supply and lending figures for the area are pointing to a subdued inflation outlook, which will encourage the European Central Bank (ECB) to withdraw its emergency liquidity measures very gradually and keep interest rates on hold for an extended period, said ING&rsquo;s Martin van Vliet.<br /><br />However, annual growth in lending to households rose slightly on the previous month to -0.1 per cent last month and the net flow of lending to households also remained in positive territory for the sixth consecutive month. <br /><br />Van Vliet added: &ldquo;This is potentially encouraging news for growth prospects as household lending tends to lead the Eurozone business cycle.&rdquo;