European Central Bank: New Loans Decreased

(Patria) - The growth of bank lending in the eurozone slowed down in January, and the M1 monetary aggregate, which represents a fundamental measure of money supply, decreased for the first time since the European Central Bank (ECB) started collecting data.

In January, the annual growth rate of lending to the private sector slowed to 3.8 percent, from 4.3 percent in December, the ECB announced today.

Adjusted loans to the private sector increased by 4.9 percent compared to the same month last year, and their growth was also 0.5 percentage points weaker than in December, Hina reports. Loans to households and companies also faltered at the beginning of 2023, the report shows.

The annual growth rate of adjusted loans to households thus decreased to 3.6 percent, from 3.8 percent in December, and adjusted loans to non-financial corporations from 6.3 to 6.1 percent, the statement said.

The broader monetary aggregate M3 in January increased by 3.5 percent compared to the same month a year earlier, after a 4.1 percent increase in December. The annual growth rate of its growth thus slowed for the fourth consecutive month and is the lowest since November 2014.

The narrowest monetary aggregate M1, which includes cash in circulation and overnight deposits, decreased in January by 0.7 percent on an annual level, for the first time since data collection began. For comparison, in December it increased by 0.6 percent.

- The latest report shows that the ECB's monetary policy tightening measures are undoubtedly affecting the money supply and private sector borrowing, which will dampen economic growth and inflation in 2023 - said ING bank economist Bert Colijn.

- We believe that the impact of the interest rate hike cycle on economic activity this year is underestimated - added Colijn.