29 Apr 2015
Credit cycle suggests ECB’s QE is working – ING
FXStreet (Barcelona) - Peter Vanden Houte of ING, reviews the Eurozone credit data, and notes that ECB’s QE program will benefit credit growth in 2015 and the pick-up in money supply growth indicates that some tapering discussion might sprout by H2 2015.
Key Quotes
“Growth in loans to the Eurozone private sector originated by banks increased 0.1% YoY in March, up from -0.1% the month before. This was the first year-on-year rise in three years. Adjusted for sales and securitization loans expanded by 0.8%, after 0.6% in February.”
“Household credit, typically a leading indicator for overall credit growth, increased to 1.1% YoY in March (adjusted for sales and securitization). The annual (adjusted) growth rate of loans to non-financial businesses was still negative at –0.6% YoY, but the pace of contraction has been slowing over the past year.”
“Fears of a credit crunch in some member states should now have abated. Indeed, as regards the ECB’s expanded asset purchase program the Bank Lending Survey recently indicated that banks have used the additional liquidity in particular for granting loans and intend to continue doing so in the coming months.”
“The ECB’s QE program was also seen to have a net easing impact on credit standards and credit terms and conditions, in particular for loans to enterprises, which are expected to increase in the coming months. We therefore believe credit growth should accelerate in the course of 2015.”
“Eurozone M3-growth accelerated further to 4.6%YoY in March, topping the consensus estimate for a 4.3% increase. Also encouraging was the further pick-up in growth of M1 to 10% YoY last month (from 9.1% in February).”
“As M1 is one of the best leading indicators of the Eurozone business cycle, the recovery should have legs. Of course a Greek default or Grexit could still spoil the party, but as things stand now, the ECB should feel assured that its monetary policy is really working.”
“While we believe that the ECB will want to avoid the mistake of tightening too soon, one can imagine that further improving monetary and real statistics risk unleashing a tapering discussion in the second half of the year.”
Key Quotes
“Growth in loans to the Eurozone private sector originated by banks increased 0.1% YoY in March, up from -0.1% the month before. This was the first year-on-year rise in three years. Adjusted for sales and securitization loans expanded by 0.8%, after 0.6% in February.”
“Household credit, typically a leading indicator for overall credit growth, increased to 1.1% YoY in March (adjusted for sales and securitization). The annual (adjusted) growth rate of loans to non-financial businesses was still negative at –0.6% YoY, but the pace of contraction has been slowing over the past year.”
“Fears of a credit crunch in some member states should now have abated. Indeed, as regards the ECB’s expanded asset purchase program the Bank Lending Survey recently indicated that banks have used the additional liquidity in particular for granting loans and intend to continue doing so in the coming months.”
“The ECB’s QE program was also seen to have a net easing impact on credit standards and credit terms and conditions, in particular for loans to enterprises, which are expected to increase in the coming months. We therefore believe credit growth should accelerate in the course of 2015.”
“Eurozone M3-growth accelerated further to 4.6%YoY in March, topping the consensus estimate for a 4.3% increase. Also encouraging was the further pick-up in growth of M1 to 10% YoY last month (from 9.1% in February).”
“As M1 is one of the best leading indicators of the Eurozone business cycle, the recovery should have legs. Of course a Greek default or Grexit could still spoil the party, but as things stand now, the ECB should feel assured that its monetary policy is really working.”
“While we believe that the ECB will want to avoid the mistake of tightening too soon, one can imagine that further improving monetary and real statistics risk unleashing a tapering discussion in the second half of the year.”