Daily Insight
Group Economics Macro & Financial Markets Research
20 April 2016
Euro banks continue to ease but demand slows
Eurozone banks’ credit standards for loans to non-financial companies eased further in Q1 …
Aline Schuiling Senior Economist Tel: +31 20 343 5606 aline.schuiling@nl.abnamro.com
…while growth in loan demand slowed signalling weaker investment growth
The ECB’s QE programme has had an easing impact on lending standards
Germany’s ZEW economic sentiment continues to improve, but remains at subdued levels
Eurozone banks ease credit standards for loans to enterprises further … The ECB’ Bank Lending Survey (BLS) for Q1 showed that banks, on balance, continued to ease credit standards for loans to non-financial companies. Credit standards eased at an accelerated pace (-4% in 2015Q4 to -6% in 2016Q1). … supported by the ECB’s QE policy In a special ad hoc questionnaire, banks reported that the ECB’s QE programme had had a net easing impact on the credit standards for loans to enterprises of 3%. It seems that ECB policy measures compensated part of the tightening impact on credit standards of the turmoil in financial markets, the sell-off in bank equities and deterioration in the economic climate in the first two months of this year. Negative interest rates were seen as having widely hurt bank profits, but had also contributed to lower bank lending rates and somewhat higher bank loan volumes. Demand for loans still positive, but weaker than in 2015Q4 Net demand for loans to enterprises continued to rise in Q1, but less sharply than in 2015Q4. Net demand fell to +17%, down from +27% in Q4. It tends to move closely in line with business climate indicators such as the manufacturing PMI and the Ifo business expectations. Therefore, the slowdown in the growth in demand for loans seems to reflect the deterioration in the business climate in the first few months of this year. Banks report that the main contributing factors for loan demand were inventories and working capital, the level of interest rates and M&A activity. The contribution of fixed investment remained positive, but was small compared to the other factors in Q1, while it also declined from the level in 2014Q4. As changes in demand for bank loans by companies tend to move roughly in line with fixed
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Daily Insight – Euro banks continue to ease but demand slows – 20 April 2016
investment, this decline in demand suggests that fixed investment growth slowed down somewhat in the first quarter of this year after it expanded by 1.3% qoq in 2015Q4.
Eurozone loans to non-financial companies % yoy
20 15 10 5 0 -5 -10 -15
80 60 40 20 0 -20 -40 -60 03 04 05 06 07 08 09 10 11 12 13 14 15 Credit standards (net tightening, lhs) Demand for loans (net increase, lhs) Bank loans to NFCs (rhs) Source: ECB Bank Lending Standards, Thomson Reuters Datastream
Germany’s ZEW economic sentiment higher, but at subdued levels The ZEW economic sentiment indicator staged its second consecutive monthly rise in April. It increased to 11.2, up from 4.3 in March. Easing worries about the global economy and improved sentiment in financial markets probably lifted sentiment. Still, it remained well below its long-term average value of 25 and also below its value at the end of 2015. Therefore, the level of the ZEW seems consistent with ongoing modest growth of the German economy. Indeed, we think GDP growth temporarily picked up somewhat in Q1 on the back of a number of one-off factors (a surge in construction output due to a mild winter and rising consumption and services sector output due to the early timing of Easter), but slowed down again in Q2.
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Daily Insight – Euro banks continue to ease but demand slows – 20 April 2016
Day
Date
Time
Country
Monday Monday Monday
18/04/2016 18/04/2016 18/04/2016
14:30:00 14:30:00
US US US
NAHB home builders' confidence index Apr Fed's Dudley (voter) gives opnening remarks at Economic Conference Fed's Kashkari (non-voter) speaks in Minneapolis
Tuesday Tuesday Tuesday Tuesday Tuesday
19/04/2016 19/04/2016 19/04/2016 19/04/2016 19/04/2016
10:00:00 11:00:00 14:30:00
US KR EC DE US
Fed's Rosengren (voter)speaks Policy rate - % ECB Bank Lending survey ZEW index (expectation economic growth) Housing starts - % mom
Wednesday Wednesday Wednesday Wednesday
20/04/2016 20/04/2016 20/04/2016 20/04/2016
06:30:00 10:30:00 13:00:00 16:00:00
NL GB TR US
Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday
21/04/2016 21/04/2016 21/04/2016 21/04/2016 21/04/2016 21/04/2016 21/04/2016 21/04/2016 21/04/2016
07:30:00 08:45:00 10:30:00 13:45:00 13:45:00 13:45:00 14:30:00 14:30:00 16:00:00
Friday Friday
22/04/2016 22/04/2016
10:00:00 10:00:00
01:00:00
Key Economic Indicators and Events
Period
Latest outcome
Consensus
ABN AMRO
58
59
59
Apr-19 Q1 Apr Mar
1.50
1.50
1.50
11.2 -8.8
8.3 -0.9
9.0 0.0
Consumer confidence - index Change in claimant count - thousands Repo rate - % Existing home sales - % mom
Apr Mar Apr 20 Mar
-4 -18.0 7.5 -7.1
-11.5 7.5 3.4
NL FR GB EC EC EC US US EC
Unemployment rate - % Business confidence manuf. - index Retail sales - % mom Main Refinancing rate - % Deposit Facility rate - % Marginal Lending Facility rate - % Initial jobless claims - thousands Philadelphia Fed - business confidence - index Consumer confidence
Mar Apr Mar Apr 21 Apr 21 Apr 21 Apr 16 Apr Apr P
6.5 101 -0.4 0.00 -0.40 0.25 253 12.4 -9.7
EC EC
PMI manufacturing - index Composite PMI output
Apr P Apr P
51.6 53.1
-2
3.5 6.5
101 -0.2 0.00 -0.40 0.25
0.00 -0.40 0.25
7.6 -9.4
-9.3
51.8 53.2
51.9 53.2
Source: Bloomberg, Reuters, ABN AMRO Group Economics (we provide own forecasts only for selected k ey variables and events)
Find out more about Group Economics at: https://insights.abnamro.nl/en/
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