M3 Slows in Europe as Loan Growth Ticks Higher

“Money-supply growth, which the European Central Bank uses as a gauge of future inflation, weakened in April as the region grappled with a debt crisis.

M3 money supply rose 2 percent from a year earlier, after increasing 2.3 percent in the previous month, the Frankfurt- based central bank said today. Loans to the private sector rose 2.6 percent from a year earlier.

The euro-region economy may struggle to gather strength as governments step up spending cuts to lower budget gaps and investors grow increasingly concerned that Greece may have to restructure its debt. ECB Executive Board member Jose Manuel Gonzalez-Paramo said yesterday that the financial environment remains “fragile,” calling some euro-region banks’ reliance on ECB liquidity measures “not sustainable.”

“There is a strong and growing divergence between core and periphery countries,” said Frederik Ducrozet, an economist at Credit Agricole SA (ACA) in Paris. “Interest rates are still very very low in real terms.”

M3 is the broadest gauge of money supply and includes cash in circulation, some forms of savings and money-market holdings. In the three months through April, M3 increased 2.1 percent from a year earlier. The annual rate of M1 money-supply growth slowed to 1.7 percent in April from 3 percent in March.”

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