Loans to private sector companies in the euro zone recovered in January from the fastest drop on record in December, European Central Bank data showed on Monday, boosted by the first instalment of the ECB's ultra-cheap 3-year loans.

The monthly flow of loans to firms stabilised, declining just 1 billion euros after falling by 35 billion euros in December.

The ECB flooded the banking system with 489 billion euros in 3-year loans in December and will offer another round on Wednesday. ECB President Mario Draghi has said the bank's move has avoided a major, major credit crunch, comments that these data back.

Euro zone M3 money supply - a more general measure of cash in the economy - grew at an annual 2.5 percent in January the data also showed, picking up from 1.5 percent in December and smashing expectations of analysts polled by Reuters of a 1.8 percent increase.

The three-month moving average of M3 growth was flat at 2.0 percent, remaining well below the ECB's reference rate of 4.5 percent, above which the bank sees dangers to medium-term price stability.

(Reporting By Eva Kuehnen)