Lending Growth in Euro Zone Stalls

FRANKFURT (Reuters) – Lending growth to euro zone businesses stalled last month, suggesting that trade uncertainty and weak overall growth offset support from European Central Bank (ECB) rate cuts, according to data from the ECB.

The ECB has cut rates by a combined 2 percentage points since last June, partly to prop up economic growth. However, surging uncertainty from erratic U.S. trade policy has weighed on business sentiment and firms’ willingness to invest.

Lending growth to non-financial firms slowed to 2.5% in May from 2.6% the previous month, breaking an accelerating trend that had prevailed all year.

The monthly flow of fresh loans was minus 2 billion euros, marking the first negative reading in over a year, despite the series being prone to volatility.

Meanwhile, lending to households continued to accelerate, though at a slow pace, rising to 2.0% from 1.9%.

At 12 billion euros, the monthly flow of loans to households was the lowest since last November.

The M3 measure of money circulating in the euro zone, often an indicator of future activity, remained steady at 3.9%, falling short of expectations for 4.0% in a Reuters poll of economists. M3 has hovered near this level all year, supporting arguments from economists that some growth remains, although it is anaemic and dominated by uncertainty.