The key chart
Trends in cumulative 12-month flows (EURbn) of loans to the EA private sector (Source: ECB; CMMP)
The key message
The ECB’s “choke hold” on financing flows to the private sector tightens further. Cumulative 12m flows to the private sector and to corporates turned negative in the twelve months to September 2023, despite positive monthly flows in September itself.
Our analysis of the latest ECB data release for “Monetary developments in the euro area, September 2023” (25 October 2023) indicates that:
- Cumulative 12-month financing flows to the private sector fell from €813bn in September 2022 to NEGATIVE €33bn in September 2023
- Cumulative 12-month flows to the corporate (NFC) sector were also NEGATIVE €21bn, despite positive monthly flows in both July and September 2023. These flows have fallen from their October 2022 high of €390bn
- Cumulative 12-month flows to the household (HH) sector slowed to €17bn, their lowest level since April 2015 and down from their recent June 2022 high of €285bn
The pace of change here reflects the rapid and unprecedented pass through of ECB monetary policy to the cost of borrowing – the first leg of monetary transmission. It also points to a sharp rise in the risks of policy errors.
For a “data dependent” central bank, the message is clear, or at least it should be…
The charts that matter
The collapse in financing flows to the EA private sector (Source: ECB; CMMP)
Trends in financing flows to the NFC sector (Source: ECB; CMMP)
Trends in financing flows to the HH sector (Source: ECB; CMMP)
Slowdown in financing flows to the HH sector reflect mortgage market dynamics primarily (Source: ECB; CMMP)
Please note that the summary comments and charts above are abstracts from more detailed analysis that is available separately.