The annual growth rate of euro zone M3 money supply rose further in June. M3 increased from an upwardly revised 3.1% Y/Y to 3.2% Y/Y, while the consensus was looking for a stabilization at 2.9% Y/Y. More interesting are however the lending data. Loans to the private sector slowed further from -0.1% Y/Y to -0.2% Y/Y as the flow was unchanged compared with the previous month. Loans to non-financials continued to decline in June, falling by €3 billion (from -€10B in June). As a result the annual rate of growth weakened from 0.0% Y/Y to -0.6% Y/Y. Loans to households on the contrary, picked slightly up, rising by €5 billion due to a slight increase in loans for house purchases (€10 billion), but remains disappointingly slow.
Although money supply accelerated further in June, the money is not really feeding through to boost lending to the private sector. Lending remains disappointingly slow, but according to the ECB’s Bank Lending Survey, this is not only due to banks’ reluctance to lend but also due to a lack of demand.