Link Securities | As published on Tuesday by the ECB, the monetary aggregate M3 declined 0.9% in the month of November at a year-on-year rate (-1.0% in October), slightly more than the 0.7% drop expected by the FactSet consensus of analysts. M1, which includes demand deposits, fell by 9.5% year-on-year in November, down from 10.0% in the previous month.
The breakdown showed continued weakness in credit dynamics. The year-on-year growth rate of total credit to euro area residents was 0.5% in November 2023, compared with an increase of 0.5% in the previous month. Growth in adjusted loans to the private sector stood at 0.4% in November at a year-on-year rate, unchanged from October’s rate, with loans to households rising 0.5% from 0.6% in the previous month, and loans to non-financial corporations remaining stable (0.0%) after falling 0.3% in October.
Assessment: the ECB’s tightening of monetary policy is causing demand for credit to remain very weak and credit standards have tightened significantly, something the ECB was aiming for in order to weaken demand and thus fight high inflation.
