Euroland money growth pulled back in September but not sufficiently to call into question the positive view of economic prospects here.

Non-financial M1 and M3 rose by 0.4% and 0.2% in September, the smallest monthly increases since June. Six-month growth rates of the two measures eased to the lowest since April and June respectively – see first chart.

The slowdown in real terms was tempered by a fall in six-month consumer price inflation (seasonally adjusted) – first chart. Six-month growth of real narrow and broad money remains within its year-to-date range and well up from 12 months ago – second chart.

Real narrow money is growing at a respectable pace across the big four economies, suggesting similar GDP growth prospects and no “weak links” – third chart.

The stockbuilding cycle has been a major drag on Euroland activity but is probably bottoming. The ECB’s Q3 bank lending survey, released last week, showed another large year-on-year fall in the net percentage of banks reporting stronger demand for inventory finance. The scale of the decline, and a small uptick from Q2, are consistent with a cycle low – fourth chart.

The survey reported broadly stable credit conditions, although more banks expect to tighten standards on loans to SMEs – fifth chart.

A turn in the stockbuilding cycle could trigger a sharp reversal of German industrial weakness. The October Ifo survey was hopeful, with the orders inflow balance positive for the first time since November 2018 and the finished goods stocks balance suggesting a slower pace of destocking – sixth chart.