A relatively obscure survey was just released by the European Central Bank. While there’s a raft of useful information in the ECB’s quarterly bank lending survey, one particularly interesting statistic is expected demand for loans by businesses – it turns out this indicator provides a lead on Eurozone GDP growth…
1. Lending survey leading indicator
The expected net change in firms demand for credit remains consistent with GDP growth around 2%, implying perhaps some scope for better GDP data. The grey lining to this silver cloud is the fact that it peaked back in the June quarter last year and has been slowing since – but reassuringly, with no major drop-off just yet.
2. Real money supply leading indicator
Another leading indicator for Eurozone GDP growth; real money supply growth (M1 money supply deflated by CPI), had been pointing to growth north of 4%. While that was never going to happen it did confirm the recovery in growth and is still consistent with GDP growth of 2% or more. But again, this indicator has rolled over back to more sensible levels after peaking in the September quarter last year.
Bottom Line: Two leading indicators for Eurozone GDP growth continue to point to growth of around 2% or more; this tends to justify a mildly positive view on European growth assets and a bearish bias on European bonds.