FRANKFURT, June 30 - Euro zone money supply growth eased in May, but remained high as investors kept putting their money in relatively safe cash assets, while credit growth improved in a sign firms start borrowing more. European Central Bank data on Monday showed the annual growth rate of M3 money supply was 8.5 percent in May, down from 8.6 percent in April, but higher than a consensus forecast. The growth rate of total credit granted to euro area residents accelerated to 4.9 percent in May, from a growth rate of 4.7 percent in April, the data also showed.
Analysts said it was a good sign that credit growth was now stabilising, as they could well be a first sign the sluggish euro zone economy was now about to recover. "The stabilisation of credit growth is a favourable thing, there has been no further decrease," said Julian von Landesberger at Hypovereinsbank in Munich. "One should keep in mind that the rate is still very moderate. It does not indicate a strong pick-up, it's rather a stabilisation at a low level," he added. Credit extended to the private sector grew by 5.1 percent in May, up from 5.0 percent in April. Analysts have been looking for credit growth to stabilise or even pick up as an early sign euro zone business activity is about to recover, as firms start looking to increase borrowing.
The less volatile M3 three-month moving average inched up to 8.3 percent from 8.2 percent for the previous period, staying well above the 4.5 percent reference value the central bank has set for growth in the monetary gauge. In a recent revision the bank has reduced the role money supply growth plays in its monetary policy strategy, now using it to cross-check inflationary pressures from the real economy, rather than as the key inflation harbinger it was earlier. The consensus in a poll of eight economists was for the annual M3 rate to ease to 8.3 percent from 8.7 percent a month earlier, and for the three-month moving average to inch up to 8.3 percent from 8.2 percent.//