Eurozone loan growth inches up in July

Credit growth in the eurozone picked up in the first full month following the UK’s decision to leave the EU, in another tentative indicator the bloc has weathered any immediate shocks from the referendum vote.

Annual household credit growth inched up to 3.9 per cent in July, up from 3.8 per cent in June, according to the European Central Bank.

On an adjusted basis, the rate of credit expansion to households remained unchanged at 1.8 per cent last month, while bank loans to businesses picked up to 1.9 per cent from 1.7 per cent in June – the equivalent of €12bn.

Growth in loans to the private sector showed a small decline however at a pace of 1.4 per cent, down 1 basis point from the month prior.

The figures should provide comfort to eurozone policymakers who have cut interest rates to record negative lows in a bid to stimulate growth and inflation in the 19-country bloc.

Rising bank loans are often cited by the ECB as a good indicator its monetary stimulus measures are trickling through to the real economy. The central bank has introduced a range of new policy innovations to encourage commercial lenders to boost credit supply to households and businesses.

July’s figures also reaffirm the broader resilience of eurozone economic activity in the aftermath of the referendum.

“The ECB has been keen to boost eurozone banks’ ability and willingness to lend to the private sector and it will be keen to ensure that this is not adversely affected by the UK’s vote to leave the EU and slower eurozone growth in the second quarter”, said Howard Archer at IHS.

Samuel Tombs at Pantheon said: “new loans to SME sector are accelerating, but total lending is improving at a much slower pace, especially in the periphery as non-performing loans roll off without being renewed”.