Loans drop again in Eurozone yet money supply grows faster

Julian Harris
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LOANS to private sector businesses in the Eurozone fell for the 12th straight month in April, figures from Brussels showed yesterday.

Yet other parts of the data revealed higher than expected growth in the money supply, leading some economists to predict a rosier outlook for the euro area.

“Real narrow money trends have been an excellent guide to economic prospects in recent years [in the Eurozone],” said Simon Ward of Henderson. The measure known as M1 “is now growing solidly,” Ward said, pointing to potential growth “that would stun a bearish Keynesian consensus.”

Loans to private firms were down 0.9 per cent in April compared to a year earlier, however, while Spain also provided downbeat news with April’s retail sales down 4.7 per cent year on year. In Italy, though, an index of business morale rose in May, to 79.8 from 74.9 in April.