FRANKFURT AM MAIN: Corporate lending in the eurozone, a key gauge for measuring the health of economic recovery, accelerated slightly in April to hit a near eight-year high, ECB data showed on Monday.
Growth in loans to non-financial corporations picked up to 2.4 percent in April from 2.3 percent in March, its highest level since June 2009, the European Central Bank calculated in regular monthly data.
The ECB closely monitors lending in the 19 countries that share the euro because it believes that businesses are more likely to spend, hire and invest if cash is more readily available, powering the economy towards recovery and inflation towards the central bank’s target of just below 2.0 percent.
Credit almost dried up completely during the financial crisis and so the ECB took a number of measures to kickstart lending: cutting interest rates to historic lows, offering low-interest loans to banks, and pumping more than 1.8 trillion euros so far into the financial system through bond-buying.
The measures worked and credit has indeed picked up noticeably.
The April data showed that lending to households also increased slightly to 2.6 percent, powered by faster growth in borrowing for both mortgages and general consumption.
“The credit market looks positive again in April… it shows that businesses are looking more confidently into the future,” said Joerg Zeuner, chief economist of Germany’s KfW bank, of the adjusted business lending figure.
The April data are also being closely watched because the ECB slowed down its mass bond-buying measures last month.
Governing council members agreed in December to slash monthly purchases of government and corporate bonds from 80 billion to 60 billion euros ($67.1 billion) from April.
ECB policymakers meet next week in the Estonian capital Tallinn, with analysts hoping for clues afterwards from president Mario Draghi on the institution’s plans to wind down its mass bond-buying still further.
Most observers expect no concrete announcements in June, but the ECB could still signal that it sees the eurozone economy in better health — an essential precondition to ending its stimulus.