Euro-area M3 money supply increased 4.0% y/y in Feb after rising 3.7% y/y in Jan (revised down from 4.1% y/y). This is the highest rate of increase since April 2009.
Growth in M1 money supply was also higher at 9.1% y/y in February from 8.9% y/y in Jan. In real terms it is a good leading indicator for economic activity and it continues to point to GDP growth around 0.7% q/q mid-2015.
"Overall, the figures confirm our view that the euro-area recovery is on track and the improvement in lending to non-financial corporations is important for GDP growth to gain further momentum." - said Danske Bank in a report on Thursday
Loans to the private sector improved further and increased 0.6% y/y in Feb up from 0.4% y/y in Jan. In Dec last year it turned positive for the first time since mid-2012. The progress in lending to the private sector was mainly driven by loans to non-financial corporations, which declined at the slowest pace since mid-2012.
Considering the monthly loan flow, which has trended higher since mid-2013, there was an increase of EUR11bn in Febafter a small decline in Jan. The three month moving average in loan flows to non-financial corporations is the highest since end-2011.
"It will be interesting to see how much of the liquidity from the ECB's QE purchases will feed through to more credit to the private sector. The liquidity from the old 3Y LTRO did not boost lending but it is now reported that there is demand for credit and loans both from households and enterprises, while banks' supply conditions have improved after the ECB's Asset Quality review and stress tests. Hence, we expect lending to continue to improve and support the recovery." - added Danske Bank
