August 28, 2019 / 8:19 AM / 22 days ago

Euro zone household lending growth rises to post-crisis high

FILE PHOTO: A man walks towards the European Central Bank (ECB) headquarters in Frankfurt, Germany, July 25, 2019. REUTERS/Ralph Orlowski/File Photo

FRANKFURT (Reuters) - Bank lending in the euro zone accelerated in July while a money supply indicator which often foreshadows future activity rose far more than expected, data from the European Central Bank showed on Wednesday.

Household lending growth accelerated to a post-crisis high of 3.4% in July from 3.3% in June, while corporate lending growth held steady at 3.9%, equaling its best rate this year, suggesting that even as the economy continues to cool, it is not facing a downturn or a recession.

Still, with growth now below trend due to weak export demand for manufactured goods, the lending figures are unlikely to ease the ECB’s concerns, and policymakers are all but certain to approve a fresh stimulus package at their Sept 12 meeting.

Indeed, with a hard Brexit looking ever more likely and a global trade war sapping confidence, Germany’s vast industrial sector is already in recession, raising the risk that its malaise will soon infect the domestic economy and spread around to other nations.

While market expectations for policy action are still in flux, a deposit rate cut, revamped interest rate guidance and the restart of bond purchases, also known as quantitative easing, appear highly likely.

The ECB is also likely to consider a multi-tier deposit rate and more favorable lending terms to prop up the bank sector, which transmits the bulk of ECB policy to the real economy.

The annual growth rate of the M3 measure of money supply, which often serves as a reliable indicator of future activity, grew by 5.2% in July after 4.5% in June, beating forecasts for 4.7%.

Reporting by Balazs Koranyi; Editing by Toby Chopra

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