Eurozone credit growth hits glass ceiling while money growth weakens - ING

Teunis Brosens, Senior Economist at ING, notes that the Eurozone bank lending to households and businesses continues to grow, at 2.0% year-on-year in October.

Key Quotes

“Credit growth has been stable around 2% for abour a year now. Most lending is still taking place in France, with Germany a close second. Lending also remains strong in Belgium, while net lending remains slightly negative in Spain.”

“The ECB's controversial monetary policy has no doubt contributed to the recovery of Eurozone bank lending. But it appears that, despite ongoing ECB purchases, bank lending growth struggles to move beyond the 2%-mark.”

“At the same time, and in contrast to last week's positive survey data, the monetary leading indicators continue to weaken. While the relationship betwen monetary flows and economic growth is difficult to interpret in times of QE and negative rates, monetary developments are pointing in the wrong direction.”

“The weakening of monetary indicators strengthen the case for an extension of QE. We think the ECB will announce such an extension next week.”