In January 2016, euro area’s M3 money supply growth accelerated to 5% y/y, as compared with December’s 4.7%. The rebound in credit to private sector continues to be weak, quickening to only 0.9% y/y in January from December’s 0.8%. However, according to Societe Generale, there are some positive signs, and it is likely to have rebounded further in February, surpassing the mark of 1% y/y. Credit growth to private sector is expected to reach above 2% by the end of 2016.
“Overall money supply growth should continue to hover above the ECB’s reference target rate of 4.5%. Credit to governments from MFIs (read Eurosystem’s QE) will continue to contribute the bulk of this (3.1pp contribution to the 5.0% yoy M3 growth last month)”, says Societe Generale.
