Eurozone economy picks up pace of borrowing in November

FRANKFURT]Growth in lending to eurozone businesses and households picked up in November, official data showed Friday, in an encouraging sign for European Central Bank chiefs as they begin withdrawing support for the economy.

The pace of growth in loans to the private sector added 0.1 percentage points last month to reach 2.9 per cent year-on-year, according to European Central Bank figures adjusted for some purely financial transactions.

Central bank governors watch loan growth closely as an indicator of whether policies designed to stimulate growth and inflation in the 19-nation single currency area are working.

A breakdown of the figures showed that growth in credit to households inched up by 0.1 percentage points, reaching 2.8 per cent in November.

Meanwhile, expansion of lending to businesses picked up further after a leap in October, adding 0.2 percentage points last month to reach 3.1 per cent year-on-year.

The ECB has offered cheap loans to banks, set interest rates at historic lows and pumped 2.2 trillion euros (S$3.51 trillion) into the financial system through bond-buying, hoping to power growth and boost inflation to its target of just below 2.0 per cent.

Growth has picked up as the eurozone economy recovers from the aftershocks of the financial crisis, prompting policymakers' October decision to slash their monthly bond purchases by half from January, to 30 billion euros ($36 billion).

But inflation remains stubbornly short of the central bank target, with ECB chiefs prepared to reopen the cash floodgates if it falls too far.

AFP