Eurozone’s money supply growth pace likely to have rebounded in August

Euro area’s money supply growth pace is expected to have rebounded in August. The annual pace of growth of M3 in the euro area had dropped a bit in July to 4.8 percent year-on-year, following a 5 percent rise in June. This was mostly due to a base effect. According to a Societe Generale research report, money supply growth is likely to have rebounded more than 5 percent in August and is expected to remain slightly above 5 percent in the months ahead.

Credit to governments remains the key driver; however, encouragingly, loans to the private sector continue to indicate gradual improvement. The latest ECB lending surveys have indicated a net easing of credit standards and a rise in loan demand, whereas lending rates remain on a downward trend. The gradual improvement in loan dynamics is expected to continue, noted Societe Generale.

But, most of the flow to loans to consumers and companies comes from France and Germany. Also, the ECB CSPP has set off a solid rebound in corporate bond issuance and this has been a drag on the flow of bank credit to huge companies.