The ECB released data on monetary developments during July 2012. Although other people might focus on statistics such as the M3 growth rate, i mostly pay attention to the analytical data on loans to the private sector:


Household loans are still on a negative path, with mortgage loans turning negative after a positive development during June. Non-financial corporations posted a strong increase in their short-term loans (up to 1 year) with a positive flow of €15bn compared with negligible amounts in June and negative flows in May. Still, long-term borrowing (which mostly corresponds to investment projects) is negative (the annual growth rate of loans with maturities between 1-5 years is -2.7%) with even loans over 5 years (which correspond to the largest outstanding amount) stalling to zero growth. Given the fact that ECB dropped its refinancing rate in July and money market rates went to zero/negative territory, it is possible that corporations took advantage of available cheap financing to boost their short-term capital buffers. The following months will determine if this development was a one-time event.

Total loans were positive only because ‘Loans to non-monetary financial intermediaries ‘ posted a positive flow of €37bn, due to a €33bn increase in reverse repos to central counterparties.

Another interesting development is the fact that holdings of ‘securities other than shares’ dropped strongly during July by 57bn, compared with a drop of 34bn in June and a positive flow of 5bn in May. It is clear that the securities market is experiencing major difficulties.

In general, the Eurozone seems to continue to be in a state of mild recession, although the fact that things do not seem to be worsening much should be considered positive.