Credit to Residents in the Euro area experienced a marginal increase of 0.1 percentage points in the first month of the year compared to December last year.

According to the January 2022 Monetary developments report released by the European Central Bank (ECB),the annual growth rate of total credit to euro area residents stood at 6.2% in January 2022, compared with 6.1% in the previous month.

On the country, the annual growth rate of credit to general government decreased to 10.8% in January from 11.3% in December, while the annual growth rate of credit to the private sector increased to 4.3% in January 2022 from 4.0% in December 2021.

The annual growth rate of adjusted loans to the private sector (i.e. adjusted for loan sales, securitization and notional cash pooling) increased to 4.6% in January from 4.2% in December 2021.

“Among the borrowing sectors, the annual growth rate of adjusted loans to households stood at 4.3% in January, compared with 4.2% in December, while the annual growth rate of adjusted loans to non-financial corporations stood at 4.4% in January, compared with 4.3% in December”.
ECB

Components of the broad monetary aggregate

The report revealed that annual growth rate of the broad monetary aggregate (M3) decreased to 6.4% in January 2022 from 6.9% in December, averaging 6.9% in the three months up to January.

The annual growth rate of the narrower aggregate (M1), which comprises currency in circulation and overnight deposits, decreased to 9.0% in January from 9.8% in December. The annual growth rate of short-term deposits other than overnight deposits (M2-M1) was -0.1% in January, compared with -1.5% in December. The annual growth rate of marketable instruments (M3-M2) decreased to 0.6% in January from 6.6% in December.

Looking at the components’ contributions to the annual growth rate of M3, the ECB disclosed that the narrower aggregate M1 contributed 6.4 percentage points (down from 7.0 percentage points in December), whilst short-term deposits other than overnight deposits (M2-M1) contributed 0.0 percentage point. Marketable instruments (M3-M2) also contributed 0.0 percentage point (down from 0.3 percentage point).

From the perspective of the holding sectors of deposits in M3, the annual growth rate of deposits placed by households decreased to 5.3% in January from 5.5% in December, while the annual growth rate of deposits placed by non-financial corporations decreased to 7.5% in January from 8.5% in December 2021.

Finally, the annual growth rate of deposits placed by non-monetary financial corporations (excluding insurance corporations and pension funds) increased to 15.0% in January from 13.2% in December., according to the European Central Bank.

Counterparts of the broad monetary aggregate

As a reflection of changes in the items on the monetary financial institution (MFI) consolidated balance sheet other than M3 (counterparts of M3), the ECB broke the annual growth rate of M3 in January 2022 to its various components. Credit to general government contributed 4.4 percentage points (down from 4.6 percentage points in December), whilst credit to the private sector contributed 4.2 percentage points (up from 3.9 percentage points).

Longer-term financial liabilities contributed 0.2 percentage point (down from 0.3 percentage point), and net external assets contributed -1.2 percentage points (down from -0.8 percentage point). The ECB highlighted that the remaining counterparts of M3 contributed -1.1 percentage points (down from -1.0 percentage points).