For a fourth consecutive month, annual M3 growth was negative in October. At minus 1.0 percent, the yearly contraction was less marked than September's 1.2 percent but still steep enough to reduce the headline 3-month moving average rate from minus 1.0 percent to minus 1.2 percent. This was on the weak side of the market consensus. Versus September, M3 dipped 0.1 percent, its fourth decline in the last five months.

The modest pick-up in annual growth masked a slightly sharper fall in M1 (10.0 percent after 9.9 percent) where growth was only 0.4 percentage points above August's record low. Amongst the M3 counterparts, lending to the private sector was unchanged on the year and, after adjustment for loan sales and securitisation as well as for positions due to notional cash pooling services, up 0.4 percent. Within the latter, growth of loans for house purchase edged up a tick to 0.3 percent but credit for consumption dropped from 2.9 percent to 2.8 percent and other lending from minus 2.7 percent to minus 3.1 percent. Moreover, lending to non-financial corporations fell from 0.2 percent to minus 0.3 percent, its first sub-zero print since July 2015.

In sum, the October data are soft enough to suggest that overall monetary conditions remain tight enough to sustain the likelihood of a near-term recession. To this end, today's report puts the Eurozone RPI at minus 6 and the RPI-P at minus 8, both readings showing economic activity in general falling just marginally short of market expectations.

Broad money growth (on a 3-month basis) is expected to decline again at an annual rate of 1.0 percent versus the 1.0 percent contraction in September.

M3 is the European Central Bank's (ECB) preferred broad measure of money supply. Since January 1999, the ECB has tended to focus on the 3-month moving average of the annual growth rate to judge underlying M3 trends although the significance of its 4.5 percent reference rate has been downgraded with time. The private sector lending counterpart is usually seen as the most important element of the M3 report.

While other central banks have virtually ignored money supply data, the European Central Bank has not. Thanks to the influence of the Bundesbank in organizing the ECB, M3 money supply was established as one of the 'two pillars' of monetary policy used by the ECB, the other being the harmonized index of consumer prices (HICP). While the target for HICP is two percent, the seemingly largely ignored reference target for M3 growth is 4.5 percent as measured by a three month moving average which is compared with the same three months a year earlier.

M3 measures overall money supply. It consists of M1 which is currency in circulation plus overnight deposits and M2 which include deposits with an agreed maturity up to two years plus deposits redeemable at up to three months' notice. Not all M3 measures are alike. For example, ECB M3 is approximately equivalent to the Federal Reserve's M2 measure. Because an increase in M3 leads to price inflation, this figure can also be indicative of the likelihood of future interest rate hikes.