Loan growth in eurozone private sector improves

Loans to the private sector in the euro area edged up slightly in July, European Central Bank data showed on Friday, in welcome news for the ailing eurozone. 

For the ECB, the statistics are a key indicator of the economic health of the single currency area, as borrowing is a main financing source for corporate investment which in turn should boost the eurozone's currently weak economy.

In July, approved loans rose 1.3 percent from a year ago, slightly faster than growth of 1.2 in June, an ECB statement said.

When certain strictly financial transactions are stripped out, the growth in loans also increased, with credit accorded to households and companies up 2.0 percent in July after a rise of 1.9 percent in June. 

The ECB has launched a raft of policy measures to get credit flowing, most significantly a massive programme to buy public sector bonds to pump liquidity into the system.

The ECB beefed up that programme earlier this year and also launched a scheme of ultra-cheap loans to banks on condition they lend them on to households and businesses.

Growth in the overall money supply, known as M3, slowed slightly to 4.8 percent in July, down from the 5.0 percent recorded in June, the ECB said.

The ECB regards M3 money supply as a barometer for future inflation.

Analysts said the report could ease pressure on the ECB to take further action to boost the economy at its governing council meeting next month. 

"The ECB will likely be pretty pleased with the July credit data, and it modestly dilutes the case for further stimulus at the 8 September policy meeting," Howard Archer of IHS Global Insight said. 

SourcE: AFP