S to European households and businesses grew at the fastest pace in more than a year in July as optimism about the currency bloc’s economic recovery grew, the European Central Bank (ECB) reported yesterday.
The central bank said that lending to the private sector increased 0.9 per cent on July 2009, building on a 0.5 per cent rise in June.
Analysts said that the real bright spot was that growth in lending for house purchase – a leading indicator of the Eurozone business cycle – gained further momentum in July, rising to 3.5 per cent from 3.3 per cent. However, bank lending to firms continued to contract with bank lending to non-financial firms down 1.3 per cent.
Eurozone broad money growth was weak in July, expanding at just 0.2 per cent on an annual basis, compared to a consensus of 0.3 per cent. This indicates that inflation pressures are likely to remain muted over the medium-term.
However, Klaus Baader at Societe Generale noted that shorter-term measures of M3 growth are above the annual rate, indicating strengthening momentum – over the past six months, M3 is up 1.9 per cent on an annualised basis.