New lending to euro zone companies plunged in April. And this indicates that banks are tightening access to credit even as the bloc starts to emerge from a year of lockdown. This is showed form the data from the European Central Bank.
The economic activity started to pick up in April, after the third wave of this pandemic receded in the region. This is after a double dip recession but large chunks of the services sector remained shuttered and with depleted balance sheets. In April, the monthly flow of loans to euro zone companies was a negative 26.8 billion euros. This reversed much of the 51.1 billion euro ($62.3 billion) rise a month earlier and dragged the annual growth rate of new loans to a 14-month low of 3.2% after last month’s 5.3%.
On record this monthly drop is the second deepest. It only exceeded by a 28.6 billion plunge in June 2009, at the height of the global financial crisis. Banks had provided copious emergency cash at the start of the recession. They said that, they are likely to curb access to cash this quarter and the potential reduction of state support to firms could further limit their ability to lend. The figure is likely to worry ECB policymakers when they meet next month. This is because the nascent economic recovery relies heavily on both fiscal and monetary support.
Household lending growth accelerated to 3.8% from 3.3%. The annual growth rate of the M3 measure of money supply. This is mostly a reflection of the ECB’s bond purchases, which slowed to 9.2% from 10.0% a month earlier. This is below market expectations for 9.5% growth.