Eurozone Money Supply, Private Sector Credit Rise In May

Eurozone broad money supply and private sector credit expanded in May but growth remained subdued, data from the European Central Bank showed on Thursday.

The broad monetary aggregate M3 posted an annual increase of 1.6 percent after rising 1.3 percent in April. This was the fastest growth since March 2023 and also slightly exceeded expected growth of 1.5 percent.

At the same time, the annual fall in the narrower monetary aggregate M1, comprising currency in circulation and overnight deposits, slowed to 4.9 percent from 5.9 percent in April.

Data showed private sector credit grew 0.6 percent annually in May compared with April’s 0.7 percent.

Adjusted loans to the private sector expanded 0.8 percent, following a 0.9 percent rise in April.

Among the borrowing sectors, adjusted loans to households gained 0.3 percent after rising 0.2 percent in April. Loans to non-financial corporations also grew 0.3 percent following a 0.2 percent increase in April.

Capital Economics’ economist Jack Allen-Reynolds said although money and lending growth continued gradual increase in May, both remained low.

The economist observed that the ECB interest rate cuts will probably cause lending growth to increase later this year and in 2025. However, he suspects that the effect will be small.

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