Bank lending in the Eurozone remained sluggish in July, due to the wait-and-see stance ahead of the European Central Bank’s rate cut.
According to ECB data, a small increase in loans to households was offset by a small decrease in lending to businesses, resulting in a slight increase in loans overall, well below the historical average.
The European Central Bank’s survey shows that banks continue to tighten lending conditions for businesses, while demand for loans is also falling. This means that expectations for short-term borrowing remain subdued.
Investment has been weak for some time and the subdued credit environment is not expected to support a quick recovery.
Analysts at ING emphasized that “although the downward trend in loan growth has ended, there is no significant recovery at the moment. The impact of the ECB rate hikes in 2022 and 2023 is behind us and there is some relief to be seen from somewhat lower market rates at the moment.”
