Euro area money supply growth likely slowed year-on-year in July

M3 money supply growth in the euro area is expected to have decelerated in year-on-year terms in July. According to a Societe Generale research report, money supply growth is likely to have slowed 4.8 percent following 5 percent growth in June. However, this might be due to a base effect. On a three-month average, money supply growth is expected to have remained stable at 4.9 percent.

“There have been encouraging signs in growth in credit to other euro area residents – the private sector – with acceleration to 1.5 percent yoy in June from 0 percent the previous year. We expect the improvement to continue, albeit at a very gradual pace”, added Societe Generale.

Two trends are to be noted. Firstly, loan take-up is fragmented. The volume of the flow of loans to consumers and companies comes from France and Germany. In certain smaller nations, such as Austria and Portugal, loan take-up by SMEs has dropped despite lower interest rates. And secondly, the ECB CSPP has set up a strong rebound in corporate bond issuance that weighs on the bank credit flow to bigger companies.