Eurozone bank lending strengthens in July

Bank lending to the eurozone private sector gained 0.9 per cent in July, the European Central Bank said yesterday, a sign of expanding activity in the 16-nation bloc. The increase came on the heels of a 0.5 per cent rise in June, an ECB spokesman said, revising higher the bank’s initial estimate of a 0.3 per cent rise.

Growth of the ECB’s M3 money supply indicator, which measures cash, deposits and other financial benchmarks, increased by 0.2 per cent in July, he added, in line with market forecasts. In June it had also risen by 0.2 per cent, the first increase since October 2009 after a slight rise initially reported for January was revised lower.

Lending and money supply data are widely-followed indicators of consumer demand and overall economic activity. Rising figures point to increased demand, which normally means inflation could also begin to pick up and incite the ECB to raise interest rates.

Its main interest rate currently stands at a record low of one per cent and is not expected to be raised before well into 2011.

The eurozone emerged from recession last year and while some core economies have posted solid growth rates, others on the periphery are struggling with high public deficits and debt.

The ECB also calculates M3 data on a sliding scale to smooth out exceptions, and on that basis, the money supply grew by a slight 0.1 per cent in the period from May through July, after remaining unchanged in the three months from April through June.