Euro area business lending growth rises in June, trend in lending to private sector to be maintained

The European Central Bank is monitoring closely how bank lending is evolving, given that the banking sector in the currency bloc is acting as one of the main monetary policy transmission channels to the broader economy in the euro area. The release today on this front was certainly encouraging. In spite of softer business and consumer sentiment, credit conditions continue to rebound, underpinning economic activity, noted Daiwa Capital Market Research in a report.

Looking at that, the flow of lending to non-financial corporation continued to be high in June leaving the stock of lending 4.1 percent higher compared to a year ago. This pace of growth represented a post-crisis high and a notable rebound from previous month and a year ago, when the same data indicated 3.7 percent year-on-year and 2 percent year-on-year rate respectively.

In the meantime, in terms flow of credit to households, growth was more stable. Indeed, the data released today implied that the rate in this category continued to be the same for the sixth straight month, at 2.9 percent year-on-year.

“Looking ahead, we think that similar gradually improving trend in lending to private sector in the euro area will be maintained, not least given that household and NFC balance sheets will remain on the mend and that monetary policy is set to stay accommodative despite the end of the ECB asset purchases in Q418”, added Daiwa Capital Market Research.

At 19:00 GMT the FxWirePro's Hourly Strength Index of Euro was neutral at -28.2191, while the FxWirePro's Hourly Strength Index of US Dollar was highly bearish at -103.541. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex