Lending to businesses and households in the euro area is decreasing as the European Central Bank tightens monetary policy, as indicated by the April monthly credit data. These latest numbers suggest a decline in private spending and increase the likelihood of a recession later this year, especially as the Governing Council is expected to keep raising interest rates.
The growth of M3 money supply, which measures the total amount of money in circulation, slightly missed the consensus. It decreased to +1.9% YoY, down from 2.5% in the previous month. These figures differ from the economists’ median estimate of 2.0% reported by Bloomberg News. In the meantime, in April, loans to households (ajusted for sales and securitisation) grew by 2.5% YoY (v +2.8% prior) while loans to non-financial corporations increased by 3.8% YoY (v 4.5% prior). However, on a MoM basis, credit to households and non-financial corporations declined, raising fears of a growth slowdown (and even a GDP contraction) in the second quarter.
Meanwhile, real M1 YoY (deflated from CPI), usually a leading indicator of GDP, contracted at a sharper pace in April (-12.2% YoY v -11.1% YoY in March), increasing probability of a recession later this year.