European Loan Growth Accelerated in July as Economic Recovery Gained Steam
Aug. 27 (Bloomberg) -- David Wyss, global chief economist at Standard & Poor's, talks about the outlook for China's economy. Wyss also discusses economies in the U.S. and Europe, and North Korean leader Kim Jong Il's reported visit to China. Wyss speaks in Hong Kong with Rishaad Salamat on Bloomberg Television. (Source: Bloomberg)
Loans to households and companies in Europe grew at the fastest pace in 13 months in July after the economic recovery gathered steam.
Loans to the private sector rose 0.9 percent from a year earlier after growing an annual 0.5 percent in June, the European Central Bank in Frankfurt said today. That’s the strongest increase since June 2009. M3 money supply, which the ECB uses as a gauge of future inflation, increased an annual 0.2 percent in July, the same rate recorded in the previous month.
Strengthening global demand helped Europe’s economy expand 1 percent in the second quarter, the fastest pace in four years. Economic growth may slow as governments reduce spending to tackle bloated budget deficits and the global recovery shows signs of losing momentum. Orders for durable goods in the U.S. increased less than forecast in July, a sign one of the few remaining bright spots in the economy is cooling, while China’s industrial output rose the least in 11 months.
“It is encouraging that the annual growth rate of bank lending to the private sector is moving in the right direction,” said Martin van Vliet, an economist at ING Group in Amsterdam. “But overall demand for bank credit remains subdued. This highlights the fragility of domestic demand in the euro zone, and is a reminder not to get too carried away by the recent resilience of the euro-zone dataflow.”
Confidence
European confidence in the economic outlook rose to the highest in more than two years in July and business sentiment in Germany, Europe’s largest economy, unexpectedly increased to a three-year high in August, suggesting the recovery may not lose as much momentum as some economists forecast.
ECB council member Axel Weber said last week the bank is likely to raise its euro-region growth forecasts next month after the German economy expanded in the second quarter at the fastest pace since records for a reunified country began in 1991. The ECB in June predicted euro-area growth of 1 percent this year and 1.2 percent in 2011.
Still, a report today showed Italian consumer confidence fell in August to the lowest in more than a year as government austerity measures made households more pessimistic about the their ability to save.
According to the ECB’s latest Bank Lending Survey published on July 28, euro-area banks “anticipate credit standards on loans to enterprises to tighten somewhat in the third quarter.”
In the three months through June, M3 rose 0.1 percent from the same period a year earlier, the ECB said. M3 is the broadest gauge of money supply and includes cash in circulation, some forms of savings and money-market holdings. The annual rate of M1 money-supply growth eased to 8.1 percent from 9.2 percent.
To contact the reporter on this story: Christian Vits in Frankfurt at cvits@bloomberg.net
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