The key chart
The key message
Broad money (M3) growth in the euro area slowed from 10.1% YoY in July to 9.5% YoY in August, but remains elevated in relation to recent trends. Narrow money (M1) growth also slowed from 13.5% YoY in July to 13.2% in August, but still contributed 9ppt to the overall growth in broad money.
Monthly flow data supports the narrative that uncertainty levels have peaked but remain elevated. Household and corporate monthly deposit flows, for example, peaked in April and May, but still remain 1.4x and 2.1x their respective 2019 averages.
Growth in private sector credit, the main counterpart to M3, has also slowed from May’s recent high of 5.3% YoY to 4.6% YoY in August but the gap between growth in the supply of money and the demand for credit remains very wide. Private sector deleveraging in the euro area remains gradual and incomplete.
As before, relatively robust corporate demand for credit (7.1% YoY) and resilient mortgage demand (4.1% YoY) offset relatively weak demand for consumer credit (0.3% YoY). However, more extreme monthly variations in credit demand have moderated.
On a positive note, consumers in the euro area stopped repaying credit in May and monthly consumer credit flows over the past three months have been close to the average levels of 2019.
In short, no change to the message from the money sector in August – extreme monthly flows may have peaked, but the road to recovery in the euro area remains long and uncertain.
Six charts that matter
Please note that the summary comments and graphs above are extracts from more detailed analysis that is available separately.