FXstreet.com (Barcelona) - The Euro-Zone M3 money supply for November fell by -0.2% on the year, far under market expectations of reduced, yet positive growth.

Analysts had warned of a drop from the 1.8% growth in both September and October, but forecasts still pointed to money supply to stay in positive territory with around 0.4% growth.

The September-to-November three-month average also dropped to 0.6%, compared to the 0.9% expected by the market.

Despite emerging from recession in the 3Q, the recovery of the Euro-Zone's banking sector is still sluggish.

According to the ecPulse.com analysis team, Notwithstanding the remarkable improvement witnessed by the euro zone in the third quarter, banks are still unable to return to the pre-crisis lending rates, ever since the financial tsunami caused several banks to suffer from illiquidity and impaired balances, due to the write downs and bad loans.

The M3 is the European Central Bank's measure of money supply which calculates all currency in circulation, bank deposits, repurchase agreements, debt securities up to 2 years and the value of money market shares. It is considered as an important indicator of inflation.