| Consensus | Consensus Range | Actual | Previous | |
| Y/Y - 3-Month Moving Average | 3.5% | 3.4% to 3.5% | 3.4% | 3.2% |
| Private Sector Lending -Y/Y | 4.4% | 4.1% |
Highlights
Euro area money growth edged up in August, but the lending figures point to a more measured expansion. Annual growth in broad money (M3) rose from 3.4 percent to 3.5 percent in August, with a three-month average of 3.4 percent. The latest three-month average was 0.1 percent below the consensus forecast for the period, while growth in immediately accessible money (M1) eased from 3.1 percent to 2.9 percent.
This divergence suggests that the modest increase in overall money holdings was not matched by faster growth in cash and overnight deposits. Credit conditions were similarly steady rather than accelerating. Growth in adjusted loans to households held at 3.1 percent, while growth in loans to non-financial corporations slowed from 4.4 percent to 4.2 percent. Corporate lending still grew faster than household lending, although its loss of momentum may signal more cautious borrowing or lending.
Taken together, the figures suggest continued monetary and credit growth, with little evidence in these annual rates of a broad acceleration. These monthly updates take the RPI to 13 and the RPI-P to 17, meaning that economic activities continue to outpace market expectations in the Euro Area.
Market Consensus Before Announcement
Money growth expected at 3.5 percent annual rate in August, up from 3.2 percent in July.
Definition
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 steadily downgraded with time. The private sector lending counterpart is usually seen as the most important element of the M3 report.
Description
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.