Lending growth to euro zone businesses stalled last month, suggesting that trade uncertainty and weak overall growth offset any support provided by European Central Bank rate cuts, data from the ECB suggested today.
The ECB has cut rates by a combined 2 percentage points since last June, partly to prop up economic growth, but surging uncertainty from erratic US trade policy has weighed on business sentiment and firms' willingness to invest.
Lending growth to non-financial firms slowed to 2.5% in May from 2.6% a month earlier, breaking an accelerating trend that has prevailed all year.
The monthly flow of fresh loans was minus €2 billion and while the data series is prone to volatility, this was the first negative reading in over a year.
Meanwhile, lending to households continued to accelerate, though at the slowest possible pace, to 2% from 1.9%.
At €12 billion, the monthly flow of loans to households was the lowest since last November.
The M3 measure of money circulating in the euro zone, often an indicator of future activity, meanwhile held steady at 3.9%, coming just short of expectations for 4% in a Reuters poll of economists.
M3 has been hovering near this level all year, supporting economist arguments that some growth remains, though it is anaemic and the outlook is dominated by uncertainty.
