Aug. 26 (Bloomberg) -- Growth in loans to households and companies in the 17-nation euro area slowed in July as the region’s debt crisis weakened economic expansion and damped demand for credit.
Loans to the private sector grew 2.4 percent from a year earlier after advancing an annual 2.5 percent in June, the European Central Bank said today. The rate of growth in M3 money supply, which the Frankfurt-based ECB uses as a gauge of future inflation, stood at 2 percent compared with 1.9 percent in June.
“Banks have been tightening credit as the economy cools,” said Christian Schulz, an economist at Joh. Berenberg Gossler & Co. “That trend will continue and at these levels it’s unlikely that the ECB will see any more inflation drivers from this side.”
The ECB raised its benchmark rate twice this year to 1.5 percent after faster economic growth and higher oil prices pushed inflation above the central bank’s 2 percent ceiling. European services and manufacturing industries are expanding at the slowest pace in almost two years, adding to signs the euro-region recovery is losing momentum, a report showed Aug. 23.
M3 grew 2.1 percent in the three months through July 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.
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