Growth in eu­ro­zone pri­vate sec­tor picks up slightly: ECB

The Pak Banker - - COMPANIES/BOSS -

Growth of loans to the pri­vate sec­tor in the euro area picked up frac­tion­ally in Jan­uary, Euro­pean Cen­tral Bank data showed on Thurs­day. For the ECB, the sta­tis­tics are a key in­di­ca­tor of eco­nomic health of the sin­gle cur­rency area, as bor­row­ing is a main fi­nanc­ing source for cor­po­rate in­vest­ment which in turn should boost the eu­ro­zone's cur­rently weak econ­omy.

In Jan­uary, ap­proved loans rose 0.8 per­cent from a year ago, frac­tion­ally faster than growth of 0.7 per­cent in De­cem­ber, an ECB state­ment said. When cer­tain strictly fi­nan­cial trans­ac­tions are stripped out from the loans data, the trend re­mained the same -- with credit ac­corded to house­holds and com­pa­nies up 0.6 per­cent in Jan­uary, com­pared with 0.4 per­cent in De­cem­ber. The ECB has launched a raft of pol­icy mea­sures to get credit flow­ing, most sig­nif­i­cantly a mas­sive pro­gramme to buy more than one tril­lion euros ($1.1 tril­lion) worth of pub­lic sec­tor bonds to pump liq­uid­ity into the sys­tem.

The ECB al­ready ex­tended that pro­gramme by a fur­ther six months in a bid to drive eu­ro­zone in­fla­tion higher.

But ECB chief Mario Draghi has hinted that more stim­u­lus mea­sures could be on the cards in March if eu­ro­zone in­fla­tion does not pick up soon. Growth in the over­all money sup­ply, known as M3, ac­cel­er­ated to 5.0 per­cent in Jan­uary from 4.7 per­cent in De­cem­ber, the ECB also said Thurs­day. The ECB re­gards M3 money sup­ply as a barom­e­ter for fu­ture in­fla­tion.

Euro-area con­sumer prices rose less than ini­tially es­ti­mated in Jan­uary, in­creas­ing the pres­sure on the Euro­pean Cen­tral Bank to take steps to sus­tain the re­gion's re­cov­ery. The in­fla­tion rate was 0.3 per­cent, less than the 0.4 per­cent re­ported on Jan. 29, data from the Euro­pean Union's sta­tis­tics of­fice showed on Thurs­day. ECB pol­icy mak­ers will re­view their stim­u­lus pack­age at a mon­e­tary-pol­icy meet­ing on March 9-10, when they'll also re­lease re­vised eco­nomic pro­jec­tions.

A com­mod­ity slump and a China-led emerg­ing-mar­ket slow­down are weigh­ing on global growth and damp­ing price pres­sures. That's mak­ing the ECB's medium-term in­fla­tion goal of just un­der 2 per­cent harder to achieve, de­spite un­prece­dented mea­sures in­clud­ing neg­a­tive in­ter­est rates and a 1.5 tril­lion-euro ($1.7 tril­lion) bond-buy­ing pro­gram.

While the re­vi­sion wasn't ma­jor, per­sis­tent weak­ness "prob­a­bly hurts long-term in­fla­tion ex­pec­ta­tions," said Jean-Fran­cois Per­rin, an in­fla­tion strate­gist at Credit Agri­cole SA's cor­po­rate and in­vest­ment bank unit in Paris.

"It means clearly the ECB is not ful­fill­ing its man­date in re­gard to in­fla­tion right now." The euro fluc­tu­ated af­ter the re­port and was lit­tle changed at $1.1019 at 11:39 a.m. Frank­furt time. While in­fla­tion in Jan­uary was still higher than the 0.2 per­cent reg­is­tered the pre­vi­ous month, pol­icy mak­ers have said the rate may turn neg­a­tive in com­ing months. Core prices, which strip out volatile com­po­nents such as fuel, rose an an­nual 1 per­cent last month from 0.9 per­cent in De­cem­ber, Euro­stat said. En­ergy costs de­clined 5.4 per­cent. An ini­tial es­ti­mate for this month's in­fla­tion is due on Feb. 29.

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