Euro area: credit recovery continues in first quarter

CHART OF THE WEEK

The ECB’s bank lending survey in the euro area in the first quarter of 2018, published on 24 April, reveals a marked improvement in credit supply and demand. Credits standards and terms attached to new loans eased in all categories (enterprises, households for house purchase, consumer credit) and the increase in demand is also widespread. Banks expect this trend to continue.

Credits standards significantly eased for enterprises and households wishing to buy a home. The net percentage of banks reporting a tightening, i.e. the balance between the share of banks reporting a tightening and those reporting a easing, fell from 0% to -8% for the first category, a three-year low, and from -6% to -11% for the second, something not seen since the beginning of the series in 2003.

 

OUR ANALYSIS

The improvement in bank lending should continue to support the economic recovery in the euro area. Hard statistics were soft in the first quarter, posing the risk of a slowdown in growth. However, the PMI indices are comforting. After a sharp fall in February and March, the composite PMI for the euro area as a whole stabilized at a preliminary estimate of 55.2 for April. While this level is lower than the peak recorded in January at 58.8, it remains consistent with growth above 2% on an annualized basis.

 

The opinion expressed above is dated 24 April 2018 and is liable to change.

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Julien-Pierre Nouen

Directeur des études économiques et de la gestion diversifiée