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29 Jan 2016
Disappointing Eurozone monetary developments support ECB doves – ING
FXStreet (Delhi) – Teunis Brosens, Research Analyst at ING, notes that bank credit to Eurozone businesses (adjusted for sales and securitisation) fell back to 0.2%YoY in December, down from 0.7% in November.
Key Quotes
“Bank lending to households held steady at 1.5%YoY. It is disappointing to see the recovery of bank lending stall. ECB doves will take this report as additional evidence that the recovery of the Eurozone credit cycle is still very fragile, and may conclude that additional monetary stimulus is warranted.
The slightly disappointing credit growth in December was broad-based in the Eurozone, despite the fact that countries are still at very different points in the credit cycle. Credit growth remains solid in Belgium (bank lending growth to households and businesses +5.3%YoY, adjusted for sales and securitisations) and France (+3.6%YoY). Bank credit growth remains moderate in Germany (+2.1%YoY), and also in Austria (+1.5%YoY).
The Netherlands remains a laggard among core countries, with bank lending still negative (-3.3%YoY), especially driven by business deleveraging. In Spain, Greece, Portugal and Ireland, deleveraging is still the tune of the day. In Ireland especially credit is still contracting at a stiff -5.7%YoY. In Italy, bank lending to households is already growing (+0.8%YoY), but the business sector is still mildly deleveraging (-0.5%YoY).
Meanwhile, M1, one of the best leading indicators of the Eurozone business cycle, decelerated to 10.7%YoY from 11.3% previously. This is the lowest figure since April. But as long as M1 is written in double-digits, the outlook for consumption remains positive for at least another two quarters.
Today’s monetary developments report is most useful for ECB doves wanting to point out that the recovery of Eurozone bank lending is not a done deal yet. Moreover, monetary and financial developments still hopelessly diverge between Eurozone countries. We do not envy the ECB for having to apply a one-size-fits all monetary policy to this diverse bunch of fragile economies.
But ECB governors may not care much about monetary developments at this stage. They are more concerned about inflation developments or lack thereof. For that, we will have to wait until 11am, when Eurostat publishes its January Eurozone flash inflation estimate.”
Key Quotes
“Bank lending to households held steady at 1.5%YoY. It is disappointing to see the recovery of bank lending stall. ECB doves will take this report as additional evidence that the recovery of the Eurozone credit cycle is still very fragile, and may conclude that additional monetary stimulus is warranted.
The slightly disappointing credit growth in December was broad-based in the Eurozone, despite the fact that countries are still at very different points in the credit cycle. Credit growth remains solid in Belgium (bank lending growth to households and businesses +5.3%YoY, adjusted for sales and securitisations) and France (+3.6%YoY). Bank credit growth remains moderate in Germany (+2.1%YoY), and also in Austria (+1.5%YoY).
The Netherlands remains a laggard among core countries, with bank lending still negative (-3.3%YoY), especially driven by business deleveraging. In Spain, Greece, Portugal and Ireland, deleveraging is still the tune of the day. In Ireland especially credit is still contracting at a stiff -5.7%YoY. In Italy, bank lending to households is already growing (+0.8%YoY), but the business sector is still mildly deleveraging (-0.5%YoY).
Meanwhile, M1, one of the best leading indicators of the Eurozone business cycle, decelerated to 10.7%YoY from 11.3% previously. This is the lowest figure since April. But as long as M1 is written in double-digits, the outlook for consumption remains positive for at least another two quarters.
Today’s monetary developments report is most useful for ECB doves wanting to point out that the recovery of Eurozone bank lending is not a done deal yet. Moreover, monetary and financial developments still hopelessly diverge between Eurozone countries. We do not envy the ECB for having to apply a one-size-fits all monetary policy to this diverse bunch of fragile economies.
But ECB governors may not care much about monetary developments at this stage. They are more concerned about inflation developments or lack thereof. For that, we will have to wait until 11am, when Eurostat publishes its January Eurozone flash inflation estimate.”