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27 Mar 2014
Contraction of Eurozone bank lending could slow, but overall trend remains worrying
FXStreet (London) - It’s a relatively quiet day on the Eurozone economic calendar today. European M3 money supply as well as private loans data are due at 0900 GMT. With the exception of a slight blip in January, loans to the private sector have been in an accelerating decline since 2012, stifling much-needed business growth in the Eurozone.
Expectations for February’s print are for a slight deceleration from January’s 2.2 percent which slowed from a 2.3 percent decline December. However, lending remains firmly in contraction and there seems to be little that policymakers can do from a top-down approach, despite how hard they try. As we’ve seen from recent weak German data, with factory orders in decline, there is little in the European business environment to incentivise banks to lend.
There had been hopes that hopes that the European Central Bank's Asset Quality Review had depressed lending last year, and that we would see a recovering in 2014, however lending remains frozen in the Eurozone area, despite deposit rate cuts and even the mooted possibility of a negative deposit rate in a bid to get banks lending.
At the same time, euro-area inflation remains at a feeble 0.7 percent, according to Eurostat statistics released for February, down from 0.8 percent in January.
Today’s print may see a slight deceleration in credit contraction, but the longer-term trend remains a worrying one.
Expectations for February’s print are for a slight deceleration from January’s 2.2 percent which slowed from a 2.3 percent decline December. However, lending remains firmly in contraction and there seems to be little that policymakers can do from a top-down approach, despite how hard they try. As we’ve seen from recent weak German data, with factory orders in decline, there is little in the European business environment to incentivise banks to lend.
There had been hopes that hopes that the European Central Bank's Asset Quality Review had depressed lending last year, and that we would see a recovering in 2014, however lending remains frozen in the Eurozone area, despite deposit rate cuts and even the mooted possibility of a negative deposit rate in a bid to get banks lending.
At the same time, euro-area inflation remains at a feeble 0.7 percent, according to Eurostat statistics released for February, down from 0.8 percent in January.
Today’s print may see a slight deceleration in credit contraction, but the longer-term trend remains a worrying one.