Euro area bank lending and money supply both increased in May compared to April, according to the European Central Bank’s latest monetary developments release.
In April, the annual growth rate of M3, the ECB’s preferred measure of money circulating through the economy, fell to 2.7% from 3.2% in March.
What M3 tells us and why it matters
M3 measures the total amount of money sloshing around the euro area: cash, overnight deposits, short-term savings instruments, and a few other buckets. When M3 grows, it generally means there’s more liquidity available for businesses and consumers to borrow, spend, and invest.
On the lending side, loans to households were growing at a 3.0% year-over-year clip as of April. Lending growth has been trailing historical averages for some time now, a pattern that predates the current data release.
