Teunis Brosens, Senior Economist at ING, notes that after a minor blip in February, Eurozone bank lending is growing as before in March while the consumer credit is growing fast in the South.
“Eurozone bank lending growth to households accelerated to 2.4% YoY in March. The bulk of credit growth is being realised in mortgages. But in Spain and Portugal, loan growth is being solely realised in consumer credit (+14.8% and +14.6% YoY, respectively). Consumer credit is also growing strongly in Italy (+8.4%). Insofar consumer credit growth is linked to employment growth and thus truly increasing spending power, this is perfectly fine. Yet consumer credit is a variable to monitor to assess the sustainability of consumption growth.”
“Loan growth to businesses dipped slightly in February to 1.9% YoY, but bounced back to 2.3% in March. Among the bigger economies, Italy and the Netherlands stand out with zero or negative business loan growth.”
“Headline M3 money growth increased by 5.3% in March, up from 4.7%. While pre-2008 money growth was primarily driven by bank lending to the private sector, the steady growth of c.5% of the last two years is primarily related to QE, with increasing ECB government bonds holdings being the biggest counterpart to money growth.”
“Narrower M1 money growth accelerated to 9.1% from 8.4%. M1 is one of the best leading indicators for the Eurozone business cycle in normal times, however its predictve qualities in times of negative rates are untested. Taking that into account, M1 growth points to a continuation of the current GDP growth trend for the remainder of the year.”