Eurozone monetary statistics for March and the latest survey of bank loan officers suggest an urgent need for the ECB to embrace US / UK-style quantitative easing at its meeting next week.
Broad money M3 has contracted over the last three months, pulling annual growth down to a five-year low of 5.1% – see first chart. The liquidity squeeze remains focused on the corporate sector, with M3 deposits of non-financial companies 1.2% lower than a year ago.
In terms of the credit counterparts, M3 weakness reflects a recent fall in bank lending to the private sector – second chart. A similar decline in the US has been offset by the expansionary impact of the Fed’s securities purchases, so US M2 has continued to grow, albeit at a slower pace than in late 2008 – see last post.
The latest bank loan officer survey shows a fall in the net percentage tightening credit standards on corporate loans but the decline was much less than in the Bank of England survey released in early April – third chart. The equivalent US survey is due next week; the Fed’s statement yesterday referring to “some easing of financial conditions” hints at favourable results.