Euroarea money supply growth likely to have accelerated in September

Money supply growth in the euro area is expected to have accelerated in September. According to a Societe Generale research report, the M3 money supply growth is likely to have quickened to 5.3 percent year-on-year in the currency block. The M3 growth is likely to linger around 5 percent to 5.5 percent year-on-year in the months ahead, mainly due to the QE program, added Societe Generale.

There have been optimistic signs in lending growth to the private sector that quickened to 1.5 percent year-on-year in August from 0.8 percent in 2015. However, the ECB bank lending survey of October indicated a diverging trend between companies’ and housing loans, with the housing segment being quite encouraging, whereas the companies’ loan is struggling to take off.

There are two main concerns regarding bank loan take-up. Firstly, there are worries about fragmentation with the bulk of new loans in the euro area coming disproportionately from the two major nations. This is in spite of the fact that inconsistency in interest rates between peripheral and core nations have narrowed considerably. Secondly, there is a concern that the ECB CSPP program, which began in June, has set off a robust recovery in corporate bond issuance that is a drag on the bank loans’ flow to huge companies, stated Societe Generale.