Euro zone business lending growth plunges in September

FRANKFURT (Reuters) - Bank lending to euro zone companies fell last month with all big countries recording drops, suggesting that the bloc’s economic slowdown is increasingly persistent and widespread, data from the European Central Bank showed on Monday.

An employee holds 2 cent euro coins at the "Monnaie de Paris", national mint factory in Pessac, France, November 29, 2017. Picture taken November 29, 2017. REUTERS/Regis Duvignau

Hoping to arrest a lengthy economic slump originating mostly from Germany’s vast industrial sector, the ECB approved a fresh stimulus scheme last month, partly aimed at banks so they would continue to provide credit to the real economy.

But data suggests that the slowdown is spreading to other countries and also to the services sector, pointing to a protracted period of anaemic growth that is weighing on jobs growth.

Indeed, corporate lending growth across the 19-member currency bloc slowed to 3.7% in September from 4.3% in August, with France, Germany, Italy and Spain all showing drops.

The monthly flow of credit to corporations across the bloc was a negative 8.1 billion, the biggest monthly drop since January 2015 and the first negative reading since January 2019.

In France alone, the monthly credit growth rate fell to 6.7% from 8.3% in August, as monthly flows were negative 11.7 billion euros (10.11 billion pounds), indicating that banks were withdrawing credit from the economy.

Monthly flows were barely in positive territory in Italy and Spain while in Germany, the monthly flow fell by two-thirds compared to August and the annual growth rate dropped to 6.4% from 6.8%.

Household lending growth meanwhile held steady at 3.4%, unchanged for the third straight month.

The annual growth rate of the M3 measure of money supply, which often serves as an indicator of future activity, slowed to 5.5% in September from 5.8% in August, underperforming expectations for 5.7%.

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Reporting by Balazs Koranyi; Editing by Alison Williams