January sa M3: +2.5% y/y
M3 sa 3-mo avg: +2.0% y/y
SA private loans: +1.1% y/y

MNI survey median:
January sa M3: +1.8% y/y
M3 sa 3-mo avg: +1.8% y/y
SA private loans: +1.1% y/y

MNI survey range:
January sa M3: +1.5% to +2.0% y/y
M3 sa 3-mo avg: +1.0% to +1.9% y/y
SA private loans: +0.7% to +1.4% y/y

December sa M3: +1.5% y/y
M3 sa 3-mo avg: +2.1% y/y
SA private loans: +1.0% y/y
—

FRANKFURT (MNI) – Private sector loans in the Eurozone rose much as
expected in January, while M3 broad money supply surprised to the
upside, increasing at its fastest annual pace since October, the
European Central Bank reported on Monday.

Rising 1.1% on the year, loan growth recovered modestly after
troughing in December. Factoring in sales and securitisation, private
sector loans picked up speed to +1.5% from December’s +1.2%. As a
result, overall credit to the private sector increased 0.7% y/y, up 0.3
percentage point from the previous month’s rate.

Credit to households slowed to +1.3% on the year, as loans for the
purchase of a new home – the most important component of consumer
borrowing – slipped half a percentage point to +1.8%.

Loans to non-financial corporations also decelerated, coming to
+0.7% from December’s +1.1%. On the month, loans declined by E1 billion
after drops of E35 billion in December and E8 billion in November.

At his press conference earlier this month, ECB President Mario
Draghi said there were indications that bank lending conditions had
continued to tighten. Yet one could not “draw firm conclusions from
these developments, particularly given that the impact of the first
three-year LTRO on bank funding is still unfolding and may not have been
fully reflected in the most recent bank lending survey.”

ECB Executive Board member Joerg Asmussen estimated on the
sidelines of the G20 summit this weekend that the first three-year LTRO,
which injected close to half a trillion euros into the banking system,
had had a “positive effect”.

The second three-year longer-term refinancing operation scheduled
for this Wednesday is also likely to bring robust demand from banks,
most observers believe. Some expect a much larger draw.

In the 12 months to January, M3 money supply rose 2.5%, while
December’s growth rate was revised down 0.1 percentage point to +1.5%,
bringing the three-month moving average to +2.0%.

Among the components of M3, M1 narrow money increased 2.0% compared
to +1.6% in December, while the annual growth rate of short-term
deposits other than overnight deposits picked up to +2.6% from +1.9%
previously. Marketable instruments increased 4.3% on the year after
falling 0.5% y/y in December.

While favourable base effects and slowing activity are widely
expected to lead to a slowdown in inflation in the coming months,
costlier energy poses an upside risk for the near term. A European
Commission poll showed selling price expectations rising across all
major sectors in January.

Nevertheless, companies’ ability to pass on costs to clients
remains limited for the time being. Firms polled in February’s PMI
reported a fall in prices charged for the third consecutive month, as
cheaper prices in the services sector offset the “moderate” rise in
industry.

–Frankfurt newsroom +49 69 720 142; e-mail:frankfurt@marketnews.com

[TOPICS: M$$EC$,M$X$$$,M$XDS$,MT$$$$,MTABLE]