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Peter Vanden Houte, chief economist at ING, notes that Eurozone’s annual growth rate M3 – the measure of monetary supply, accelerated to 5.2% in July 2019 from 4.5% in June and this was well above the consensus expectation of 4.7% growth.

Key Quotes

“Off course, the strong decline of bond yields further reduced the opportunity costs of holding M3, supporting money growth. The annual growth rate of narrow monetary aggregate M1 also increased to 7.8% in July from 7.2% in June.”

“Looking at the counterparts of M3, there was a strong contribution from net external assets. This reflects an increased interest in the euro area from foreign investors, but as the ECB indicated itself in the Economic Bulletin, this factor tends to be volatile and may therefore not be durable.”

“The annual growth rate of adjusted loans to households slightly accelerated to 3.4% in July, compared with 3.3% in June, while the annual growth rate of adjusted loans to non-financial corporations stood at 3.9% in July, unchanged from the previous month.”

“The decent growth in monetary aggregates should take away the sense of panic. M1, which has been a good leading indicator in the past, still signals GDP growth close to 1% in 2020.”