Euro area’s money supply growth likely to have quickened in June

Euro area’s M3 money supply growth is expected to have accelerated in June. According to a Societe Generale research report, the money supply growth is likely to have accelerated to 5.2 percent last month. Credit to government from MFIs in the month of May added 4.1 percentage points to the 4.9 percent year-on-year M3 growth. M3 growth is expected to hover around 5 percent to 5.5 percent year-on-year, stated Societe Generale.

Strengthened by the expansion of QE program, it is expected to move towards the range’s higher end and possibly beyond it. The rebound in bank credit to the private sector has continued to be weak. It rose 1.3 percent year-on-year in May.

“We look for a gradual improvement only, in particular regarding the flow of loans to non-financial corporations (1.2 percent yoy),” said Societe Generale.

Firstly, the second quarter Bank Lending Survey of the European Central Bank indicates a continued easing in credit standards for loans; however, demand alleviated a bit. Secondly, the ECB CSPP program has set off a solid rebound in corporate bond issuance and this trend is being a drag on the bank credit’s flow to huge companies.

In the meantime, the credit’s flow to consumers has been hovering around 2.1 percent year-on-year since spring. Only a mild rebound is expected in the months ahead, added Societe Generale.