Release: EUR Private Loans y/y (Feb) Consensus Forecast: 1.3% Previous: 1.1% Date/Time: 03/28/12 4:00 AM EDT (08:00 GMT, 09:00 BST)
Did LTRO 1 and 2 Stabilize and Improve Bank Lending?
The European banking system was saved from a funding crunch as the ECB stepped in forcefully to backstop with more than €1 trillion with its 2 LTRO offerings. The question is will that help to give Euro-zone banks enough leeway to begin lending to the regular economy.
Back when we had a look at December's data, the drop in lending to non-financial corporations saw its biggest monthly decline since data started in 2003 (close to -€40 billion).
Here is another view with all 3 key measures of lending - non-financial corporations, consumer credit, and morgages - plotted for the last 9 years. In January, lending to non-financial corporations stabilized at around -€1 billion. At the same time January's data also saw increases of €2 billion in consumer credit and a €4 billion increase in mortgage lending.
When looking at total loans to the private sector and M3 money supply, the Euro-area still remains far off its normal pace, here seen at around 4%.
The expectation is that loans rose 1.3% y/y in February, which would show improvement while M3 money supply remains at 2.5%.
Usually, bank lending figures don't carry that much importance, but in the case of Europe - it's likely to carry more weight as the Euro-zone tries to escape the near credit crunch faced by banks at the end of 2011 and investors and market participants gauge if bank will retrench in their lending, or help lubricate economic activity by offering up new loans. Banks, for their part, continue their deleveraging as well as raising capital requirements to meet new regulatory rules.
Therefore, if the figures underwhelm it could certainly weigh on the growth outlook going forward for the Euro-zone, and therefore could undermine the EUR as a result - both in the short term and as a key theme to watch in the medium term.
Nick Nasad is a macro economist, market analyst, and educator; and one of the main contributors to FXTimes.com - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
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