Eurozone money supply slows sharply in April

Money supply in the euro area slowed sharply in April, although some economists cautioned that the underlying details of the report painted a significantly better picture.

The rate of growth in the most-widely followed measure of money supply, known by the acronym M3, fell from a year-on-year pace of 5.0% in March to 4.6% in April, according to the European Central Bank.

Economists had anticipated a reading of 5.0%, unchanged from the previous month´s reading.

A sharp drop in the rate of growth of deposits placed by non-financial corporations, from 4.1% to 0.8%, accounted for the bulk of the decline in M3.

The narrowest so-called monetary aggregate, M1, which includes only currency in circulation and overnight deposits, declined from 10.1% in March to 9.7% in April.

On the asset side of the equation, private credit grew by 1.2%, up from 1.1% in the month before, while that extended to general government rose from 10.1% to 10.4%.

In a research note sent to clients, Barclays´s Fabios Fois said he was "not too worried" about the drop in the annual rate of growth in the euro area money supply.

"Rather, we find several reasons to remain constructive on the lending outlook, in particular to the private sector," he said.

Fois pointed to what he described as a still healthy pace of growth in credit for consumer consumption and house purchase, alongside lending to non-financial corporations which continued to be "well-oriented" towards long durations.

"Therefore, we remain of the view that the private sector lending outlook will continue to improve, albeit very gradually, and help support the ongoing domestic demand-driven economic recovery in the region."