FRANKFURT, Dec 30 - Households and businesses in the euro zone increased their borrowing sharply in November and money in bank accounts declined, the European Central Bank said on Tuesday in data that pointed to a strengthening recovery. Credit to the private sector grew by 6.0 percent annual rate after seasonal adjustment, up from a revised 5.5 percent rate in October and September, the ECB said. The pickup in private credit from the levels around four percent in spring is a sign that businesses and consumers have regained the confidence to borrow now the economy appears on the mend. Likewise, a slowdown in money supply growth signals that people are starting to invest again rather than horde cash.
M3, the broad measure of money in bank checking and savings accounts expanded at a 7.4 percent annual rate, down from an upwardly revised 8.1 percent in October, the ECB said. The three-month moving average was 7.7 percent compared with an upwardly revised 8.0 percent in October. A slowdown in the growth of money supply is a welcome development for those ECB policymakers concerned about the inflationary potential of an economy awash in cash. The euro zone for years has overshot the ECB's 4.5 percent reference value for annual M3 growth, and the central bank said in May it now views monetary developments as only one factor among many to monitor for inflationary risks and worth watching more over the medium to longer term. As a result, financial analysts pay more attention to credit growth to measure the health of the euro zone economy, and its return to the six percent range brings it toward the 6.7 percent annual growth rate seen for all 2001. The ECB said that private lending accelerated to a 5.6 percent annual growth rate in November, up from 5.1 percent in October. Equity credit also picked up to 4.1 percent annual rate from 3.3 percent.//