Eurozone Loan Growth Pauses in July

The pace of lending to eurozone firms and households paused in July, official data showed Tuesday, complicating the picture for the European Central Bank as it prepares to scale back its easy money policies.

Credit to non-financial firms grew 3% year-on-year last month, adjusting for some purely financial transactions, the same rate as in June. Growth in borrowing to households was also flat month-on-month at 4.1%, the ECB said in a statement, AFP reported.

The pace of loan growth is a key indicator of financial health for the ECB as it prepares to withdraw its massive support for the eurozone economy.

Overall, credit to the private sector in the 19-nation single currency area increased 3.4% in July, a slowdown of 0.1% from June as financial firms like pension funds and insurance companies borrowed less.

Aiming to boost growth and stoke inflation to its target of just below 2%, the ECB has set interest rates at historic lows and buys €30 billion (S$47.8 billion) of government and corporate bonds per month.

The measures are designed to pump cash through the financial system and into the real economy, where it can power investments, hiring and consumer spending.

The ECB has said that it will reduce purchases to €15 billion per month from October before ending them in December, saying the move is justified as inflation is on a solid path towards its goal.

A quarterly survey by the Frankfurt institution last month showed that between April and June, demand for credit remained strong among firms and households and banks were loosening conditions for issuing and repayment of loans.