Eurozone bank lending strengthened in May - ING

Bert Colijn, Senior Economist at ING, notes that the bank lending to both businesses and households in the Eurozone gained momentum in May as the pace of growth accelerated from 1.2 to 1.4% y-o-y for businesses and from 1.5 to 1.6% for households.

Key Quotes

“Especially the stronger growth in loans to non-financial corporates is encouraging, as it indicates that the outlook for investment is improving. Since these numbers are for May, it obviously has not yet included the full effect of Brexit uncertainty, which clouds the outlook for continued lending in the coming months. It does show that the investment environment in the Eurozone is relatively robust, but whether this means that it will be able to weather the high uncertainty that the EU referendum result in the UK brings, remains to be seen as events unfold.

Growth in the broad monetary aggregate M3 increased from 4.6 to 4.9% in May, but the trend remains roughly stuck at about 5%. The narrower aggregate M1 continues to see lower growth rates, which is a trend that has been seen since early 2015. Overall, the monetary developments in May do not give off any alarming signals to the ECB. The improved pace of borrowing will encourage the ECB that their current policies are helping the recovery of borrowing and investment in the Eurozone.

While this is satisfactory, it is doubtful that this is causing cheers in the Euro-tower. Mario Draghi had already stressed his concerns about the impact of a Brexit on the global economic environment at the last ECB board meeting and the ECB indicated on Friday that it is on high alert to assess the immediate impact of the event and stands ready to provide liquidity to stabilize markets.”