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ECB says private lending contracted for ninth month in January

By Jana Randow

Lending to households and companies in the euro area shrank for a ninth month in January as the recession damped demand for credit.

Loans to the private sector fell 0.9 percent from a year earlier after dropping and annual 0.7 percent in December, the Frankfurt-based European Central Bank said today. Loans fell 0.1 percent in the month.

The 17-nation euro region is battling its second recession in four years as governments from Greece to Spain rein in spending to cut excessive deficits. There are signs that parts of the economy are beginning to recover. Business confidence in Germany jumped to a 10-month high in February and the Bundesbank predicts Europes largest economy will return to growth in the current quarter.

Demand for credit remains weak for now but should improve somewhat in the second half of the year, said Holger Sandte, chief European analyst at Nordea Bank AB in Copenhagen. Still, we wont see a credit boom. The economic recovery will be bumpy and the overall environment rather difficult.

The ECB kept its benchmark interest rate at a record low of 0.75 percent this month. President Mario Draghi said on Feb. 7 he expects the euro economy to recover gradually in the course of 2013. The central bank predicts the economy will shrink 0.3 percent this year and grow 1.2 percent in 2014.

The rate of growth in M3 money supply, which the ECB uses as a gauge of future inflation, rose to 3.5 percent in January from 3.4 percent in December, the ECB said today.

M3 grew 3.5 percent in the three months through January from the same period a year earlier. M3 is the broadest gauge of money supply and includes cash in circulation, some forms of savings and money-market holdings. [Bloomberg]

ekathimerini.com , Wednesday February 27, 2013 (11:45)  
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