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ECB money supply growth belies credit crunch fears

Headline M3 money supply growth eased to 11.5 percent from December’s upwardly revised 11.6 percent while growth in loans to the private sector edged down to 11.1 percent from the previous month’s upwardly revised 11.2 percent.

Economists polled by Reuters had on average expected M3 growth to slow to 11.4 percent and for growth in private sector loans to drop to 10.8 percent.

‘It’s reassuring in a way. Loans to the private sector are very resilient. It doesn’t seem like we’re in the middle of a credit crunch,’ said Gilles Moec, senior European economist at Bank of America.

The ECB’s data on actual bank lending contrasted with the ECB’s quarterly surveys of banks’ stated lending intentions which had pointed to a slowdown, he said.

‘We have a continuation of the trends in the previous months-a slowdown in mortgage lending is offset by strong consumer credit, and loans to businesses are accelerating,’ he added.

ECB Vice-President Lucas Papademos said on Tuesday that he saw no evidence of a credit crunch in the euro zone and that he did not expect a major impact on growth from financial market turmoil.

‘For the ECB this means that they cannot cut rates. And we can deduce something else from the M3 data: banks do not seem to be in as dire straits as we all assumed,’ said Thorsten Polleit, a euro zoneeconomist at Barclays Capital.

Moec shared Polleit’s views, but said there was other pressure on the ECB to ease rates from the US slowdown and the euro’s latest climb above $1.50 EUR.