Loan growth to euro zone firms picks up

FRANKFURT: Growth in lending to companies in the euro zone picked up in May, official data showed on Wednesday, a bright spot in the data as fears of economic slowdown intensify.

Adjusted for some purely financial transactions, the pace of growth in credit to firms picked up to 3.6 per cent year-on-year last month, up from 3.3 per cent in April, the European Central Bank said in a data release. Growth in lending to households was flat at 2.9 per cent, also in adjusted figures.

That meant firms accounted for most of the increase in the pace of credit growth last month, from 3.0 to 3.3 per cent.

Economists watch loan growth closely, as more cash flowing into the economy points to an increase in activity.

ECB policymakers are particularly alert to new data following their decision this month to dismantle a key pillar of their support to the euro zone by the end of the year.

Aiming to boost growth and stoke inflation to the target of just below 2.0 per cent, the Frankfurt institution has set interest rates at historic lows and buys 30 billion euros ($35 billion) of government and corporate bonds per month.

Both policies are designed to pump cash through the financial system and into the real economy, where it can power investments and consumer spending. — AFP