Eurozone loan growth stagnates in August - ING

Bert Colijn, Senior Economist at ING, notes that the Eurozone’s pace of lending to households and non-financial businesses has stagnated in August, indicating that the recovery of loan growth is continuing at a snail’s pace.

Key Quotes

“Loans adjusted for loan sales and securitization to households grew by 1.8% YoY and by 1.9% to non-financial corporations. This indicates that uncertainty has caused businesses and consumers to be a little more risk averse in August, putting a dent in the recovery of loan growth and putting pressure on GDP growth in the third quarter. While loans to the private sector disappointed in August, the broad monetary aggregate, M3, did grow faster in in August, by 5.1% YoY up from 4.9% in July and growth in M1 also accelerated. While this is in normal times a good leading indicator, the success of M1 at predicting growth falls and stands with the current large ECB stimulus program.

With rates being pushed down by the ECB’s QE policy, attractiveness of borrowing has been pushed significantly. The growth in Eurozone borrowing remains rather weak though, showing only limited impact of the program thus far. Nevertheless, credit growth for consumption accelerated slightly in August, suggesting some upside for consumer spending in Q3. The stable growth in loans to businesses could indicate that the investment climate in the Eurozone has not faltered under the pressure of this summer’s political risks so far. This supports the view that GDP growth is likely sustained at a relatively moderate pace of 0.2-0.3% QoQ.”