Narrow money supply in the euro area stabilises further in November

The euro area's money supply tightened further last month but some economists believed they could spy a silver lining in the data.

According to the European Central Bank, the rate of growth in the Eurozone's broad money supply - designated M3 - slowed from an annualised pace of 3.9% for October to 3.7% in November.

That fell a tad short of economists' projections for a dip in the rate of growth to 3.8%.

On an annualised basis, the rate of growth in short-term deposits was unchanged at -1.0%, but that for marketable instruments declined from 4.6% to 6.0%.

However, the rate of growth in the narrowest measure of money supply dipped by just a tenth of a percentage point to 6.7%.

That, said Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics, was potentially significant.

"M1 appears to be stabilising at just under 7% year-over-year. If sustained, real M1 growth should increase in coming months as inflation eases, pointing to a slightly improved outlook for GDP growth towards the end of the year. The story for 2019 as a whole, however, is unchanged. Full-year growth is set to slow significantly," he said.

On the asset side of the Eurozone's consolidated balance sheet meanwhile, the rate of growth in credit to residents of the single currency bloc weakened from 2.9% to 2.7%, with that of credit to the general government dropping from 2.7% to 2.2% and that for the private sector from 3.0% to 2.8%.

"Loan growth to households and non-financial firms—adjusted for secularisation and asset sales—accelerated marginally, by 0.1pp in both cases, to 3.3% and 4.0%, respectively," Vistesen added.

"These are solid data, but they tell yesterday’s story. Credit growth in the Eurozone tends to lag the business cycle, and the slowdown in the second half of 2018 points to more subdued growth in private sector lending in coming quarters."