Italian and Spanish lending still in negative trend in August, M3 data show

Money flowed more freely in the euro area during the month of August, but some economists were wary nonetheless.

The rate of growth in the money supply as measured by the M3 monetary aggregate accelerated from the 4.9% year-on-year pace observed in July to 5.1% in August - its fastest since February 2009 - according to the European Central Bank.

Economists had penciled in a rate of 4.9%.

The previous month's reading was revised higher by one tenth of a percentage point from an initially estimated rate of 4.8%.

A three-month moving average of the rate of growth in M3 was at 5.0% in August.

Growth in so-called narrow money supply, a closely-watched lead indicator for economic activity, picked-up from a rate of growth of 8.4% in July to 8.9%, its first rise in seven months, Jack Allen, European economist at Capital Economics pointed out.

On the asset side of the euro area's consolidated balance sheet, credit to the private sector accelerated from 1.4% to 1.5%.

Loans to households and non-financial corporations expanded by 1.8% and 1.9% in August, respectively, with both rates unchanged from July.

Lending data backed up survey findings that the Brexit vote had little impact on Eurozone economic growth, Allen said, pointing to the so-called 'credit impulse', which looks at changes in the flow of credit, and which pointed to a rate of growth in gross domestic product of between 2% and 3%.

Nevertheless, similar readings had failed to pan out last year.

Furthermore, annual growth in lending to firms had been on upwards trend in France and Germany, while remaining negative for Italy and Spain, Allen said.