In January, growth in euro zone M3 money supply picked up after easing sharply at the end of 2011. Euro zone M3 rose from 1.5% Y/Y to 2.5% Y/Y, while the consensus was looking for a much slower rebound (to 1.8% Y/Y). The three-month moving average, on the contrary, slowed from 2.1% Y/Y to 2.0% Y/Y, further away from the ECB’s reference rate of 4.5% Y/Y.
Even more interesting are however the lending data. In January, loans to the private sector picked up, rising by €37 billion, after a €72 billion decline in December. Loans to non-financials stayed broadly unchanged at the start of the new year (-€1 billion) after falling by €35 billion in December. As a result, the growth rate continued to slow (from 1.1% Y/Y to 0.7% Y/Y). Loans to households, on the contrary, showed a more encouraging development, picking up by €8 billion after falling by €7 billion in December. The annual growth rate on the contrary eased further from 1.5% Y/Y to 1.3% Y/Y.
Both consumer credit and loans for house purchases picked slightly up in January. According to the ECB the very weak December data were partly due to special factors at the end of the year. The January data are somewhat more upbeat and that may be a first signal that the ECB’s 3-year LTRO is effectively working to avert a credit crunch. However, we will only see in the coming months whether the LTRO indeed really works.