Euro Area money supply growth to increase to 5.0% yoy after August dip

M3 money supply growth slowed from 5.3% yoy in July to 4.8% yoy in August. For September, the broad aggregate is expected to increase by 5.0% yoy (a 5.0% three month average increase). The yoy increase will be above the ECB's reference target of 4.5%. The main driver is the Eurosystem. Credit to governments from MFIs (which bought €48bn of government bonds in August) contributed 2.2pp to the 4.8% yoy M3 growth, most of which stemming from the Eurosystem. Commercial banks, on the other hand, have not yet started to increase their balance sheets. 

Meanwhile, the recovery in credit to the private sector is expected to remain sluggish (1.1% yoy in August) and to come mainly from loans for house purchases in Germany and in France. The flow of credit to non-financial corporations stalled during the summer (unchanged at 0.4% yoy adjusted for sales and securitizations). 

"We expect this to continue, with M3 growth hovering around 5.0-5.5% yoy, bolstered by the QE programme", notes Societe Generale.