Silver Lining Shattered As European Household Lending Plunges Most In 11 Months

Tyler Durden's picture

As excess reserves in Europe continue to fall, prompting some to claim this is positive since banks are "no longer hoarding cash," the reality of a dramatically deleveraging European financial system is far worse. As Goldman notes, lending to Non-Financial Corporations (NFCs) fell by a significant EUR17.2bn month-on-month (seasonally adjusted) in May (with a stunning 19.9% drop in Spain). Perhaps more worrisome, while NFCs have been seeing lower lending, households have been 'steady' for much of the last year - until now. Bank lending to households fell by EUR7.5bn in May. This marks the first material decline since July 2012. Simply put, the European economy (ad hoc economic data items aside) is mired in a grand deleveraging and since credit equals growth - and the ECB somewhat scuppered by a German election looming likely to hold down any free money handouts (and the fact that they cling to the OMT promise reality that is clearly not doing anything for the real economy) - with lending collapsing, growth is set to plunge further.

As we noted previously, there is a simple mnemonic for the Keynesian world: credit creation = growth. More importantly, no credit creation = no growth. And that, in a nutshell is the entire problem with Europe.


Via SocGen,

Still contracting bank lending in the euro area in May Bank lending to the private sectors keeps contracting; from -0.9% yoy to -1.1% yoy in May.


The fragmentation across countries is still pretty much marked. In Spain for instance, loans to non financial corporations contracted by 19.9% yoy in May!




Regarding the money supply, M3 resumed to its historically low trend at 2.9% yoy from 3.2%. As explained by Mr Draghi during its June ECB press conference, the stronger April reading was a consequence of several one-off factors, namely a base effect and the payment of the third capital tranche to the ESM. Assessing the credit conditions issue in the euro area remains one of the biggest challenges that are facing European policymakers.

Via Goldman Sachs,

Lending to Non-Financial Corporations (NFCs) fell by a significant €17.2bn month-on-month (seasonally adjusted) in May. The country breakdown showed that credit flows declined across France, Italy and Spain but increased in Germany. Broad money (M3) slowed from 3.2%yoy to 2.9%yoy, in line with expectations (Cons: 2.9%yoy).


1. Loans to Non-Financial Corporations, on a seasonally adjusted basis, declined by €17.2bn, after a fall of a similar magnitude in April (Chart 1). Adjusted for securitizations and sales, the figure was similar at €17.7bn. The declines seen in the past two months are somewhat larger than the more muted declines observed in Q1 this year.



2. Among the largest Euro area economies, contractions in bank lending were registered in France, Italy and Spain: loans to NFCs fell by €2.0bn in France, €4.2bn in Italy, and €10.6bn in Spain (equivalent to -0.4%mom, -0.5%mom and -1.6%mom of the outstanding stock of loans, respectively). By contrast, German bank lending to NFCs rose by €1.6bn (i.e. 0.1%mom of the stock outstanding, Chart 2).



3. Bank lending to households fell by €7.5bn in May. This marks the first material decline since July 2012. Unlike corporate lending, loans to households have remained broadly unchanged since last July, though with monthly loan flows well below their long-term average of €15bn.


4. Broad money (M3) and loans to the private sector continue to grow at diverging rates. M3 growth slowed from 3.2%yoy to 2.9%yoy, mainly driven by a further decline in short-term marketable instruments (M3-M2). Lending to the private sector edged further down to -1.1%yoy after -0.9%yoy. In normal times, money and loan growth move together (since advancing loans involves creating deposits), but the series have diverged since the end of 2011.The gap narrowed fractionally after today's release.


5. Data on bank deposits across the Euro area were also released. NFCs' total deposits in Cypriot banks declined by 3%mom in May, after a noticeable 18.7% decline in April. Cyprian households' bank deposits fell by 0.9%mom, after a 3.1%mom decline in April.


6. We continue to expect bank lending dynamics to remain subdued. Interventions by the ECB (via 3-year LTROs and the announcement of the OMT programme) have helped to 'stabilise' loan flows and alleviated tensions in sovereign markets. But balance sheet adjustment in both the financial and non-financial sectors implies weak lending volumes. This is in line with the latest ECB bank lending survey, where banks expect both weaker demand and their own tighter credit standards.

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surf0766's picture

In Amerika we lend to anyone no? All you need is you hammer and sickle VIP card.

Colonel Klink's picture

Everyone should impose their own austerity.  Cut back, pay off debt, take no new debt, remove your money from the banking system, refuse to transact with those who continue the corrupt system (mulitnationals).  Only when enough people do this, will there be true change.

Wile-E-Coyote's picture

Check, check, check ............ yeah done all that. Do I get a prize.

Colonel Klink's picture

Yeah less of a butt fucking once the SHTF.  The ultimate prize will be seeing the farce come apart.

Wile-E-Coyote's picture

I was hoping to avoid the butt fucking all together.

Colonel Klink's picture

Sorry not possible, our now corrupt uncle Sam owns you're ass if you're a plebe.

Colonel Klink's picture

No in that case you'll be taking the EU gangbang.  Smile pretty while looking over your shoulder.

NoDebt's picture

Cyclical.  Transitory.  Seasonal.

When the red lines on the right get as tall as the big-assed green lines on the left, call me.

SAT 800's picture

too early is okay; too late is not okay. Are you sure about how wise you are?

NoDebt's picture

Absolutely not.  This is definitely a case where it's better to be a year early than a day late.  I just want to see some concrete proof that points to undenyable failure of current policies so maybe, just maybe, mind you, we can finally wake up from this era of incredible, never-in-the-history-of-the-world "group think" and start to find another solution.

History will look back on this financial era in a way similar to the sinking of the Titanic.  Incredible hubris, combined with the right conditions (conditions they only THOUGHT they understood due to their afore-mentioned hubris), leading to tragedy.  The iceberg was struck in 2008, but the ship hasn't gone down yet.

"She is made of iron, sir.  I assure you, she can and will sink.  The pumps only buy you time.  Nothing more."

That is the extent of my wisdom.  Feel free to point out my folly and disagree with me, if you like.  I am not the sharpest knife in the drawer.  But even lowly rats like myself know when the ship of state is mortally wounded.

SAT 800's picture

You say that you want to see a proof; so that we can wake up., We aren't going to wake up. You and we are not the same. Your concern is saving your savings; don't worry about other people; they can do whatever they want.

SAT 800's picture

There is no solution available. What solution was available to the German people in 1943? They elected Hitler; we elected Obama; and before him George Bush, and Bill Clinton. there is no solution. Save yourself.

NoDebt's picture

I concede you may be right.  I hope not, but my gut tells me you are.  Then again, communications are radically different than back then.  A bit harder to hide things in the usual ways (take, for example, the internet- the fact we're even discussing this here on ZH, many miles apart and not knowing eachother at all).  It's all there for those who want to see.  Only those who are willfully blind will not.  Admittedly, that's a LOT of people.  Most people, in fact.  But perhaps, just perhaps, something is a little different this time.

Maybe we can head of this catastrophe before it goes full-blown.  Maybe.  I give us one chance in 10.

What can I say?  I'm an optimist.

Personally, I am far from defenseless.  I have (and continue) to prepare for that 90% chance it DOESN'T work out OK.  Wouldn't be prudent to proceed otherwise.

Stay frosty, my friend.  And thank you for the rational dialog.  Very refreshing vs. the "insulting past eachother" thing that can sometimes happen on web boards full of "radicals" like us.

HaroldWang's picture

And this just in: South Korean Industrial Production goes negative and misses consensus by a mile.

Oh, and NKE says sales in China are looking pretty awful. Rally on, folks!

NoDebt's picture

Link?  Sorry, I'm not all dialed in on Korean industrial production measurements.

HaroldWang's picture

South Korean Industrial Production is actually an important macro indicator.

SAT 800's picture

To be sure; it is. Shipbuilders to the world. And etc. and not small time etc. either.

NoDebt's picture

Good eyes.  Well done.  Thank you.

I am waiting for the next "Swirlogram."  When last I saw it on ZH it was deep into "slowdown" and headed right for the contraction quadrant.  I said then, and say now, we are about to see the first recession ever WHILE THE WORLD'S CENTRAL BANKS STILL HAVE THEIR FOOT TO THE FLOOR.  And THAT should break some shit, bigtime.

walküre's picture

Clearly a case of misunderstanding. The consensus should obviously have been far lower so that the actual data could exceed the consensus. Amateurs.

Wile-E-Coyote's picture

Would you mind taking that flag down it is rather offensive to people who love freedom.

macholatte's picture


The problem is not the flag. There's nothing wrong with it or what it represents.  The problem is that the so called "people who love freedom" allowed it to be taken away.


If we have an economic crisis in the Western world it's because the government makes up 50 percent or more of the economy. This is a cancer that is taking away people's freedom.

Marc Faber


It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.

Henry Ford


America is just downright mean.

Michelle Obama


The American people are tired of liars and people who pretend to be something they're not.

Hillary Clinton


JustObserving's picture

NKE says sales in China are looking pretty awful

After the Chinese politburo slammed the US as the biggest villain in the world for its extensive electronic snooping, it can be anticipated that US products will have diminished sales.  After the  kerfuffle over the Senkaku islands, sales of Japanese products fell off a cliff in China.

Sales of iPhones will never recover in China and Hong Kong due to Snowden's revelations of widespread spying by the NSA.

JFKFC's picture

Earth to Asian markets:
US GDP is 70% consumer spending.
'the fuck you think was gonna happen after a .6% Q1 downward revision?

LetThemEatRand's picture

A few years ago I thought these guys were just so blinded by ideology (give to the rich and it will trickle down to the middle class) that they truly didn't see that printing money and giving it to a few thousand oligarchs wouldn't work.  Now I realize that these guys know exactly what they are doing.  This is all by design.  Over the last few years we have witnessed the greatest theft in the history of the world, as Central Banks printed real cold hard cash and gave it to their oligarch buddies under the guise of "saving the economy," putting all of us on the hook for repayment of that cash over future generations.  When the "experiment" predictably fails, they will say "who knew?", and the vast majority of the population will accept that it was a mistake and grind through years (probably decades) of poverty while it all unwinds and the oligarchs laugh from their Amalfi Coast mansions.  Point, set, match oligarchs.  

fonzannoon's picture

growth growth growth gowth growth POP

growth growth growth growth growth...

NoDebt's picture

You know why your eyes hurt right now?  Because you've never used them before. 

Where you been?  This has been a take-over for YEARS now.  2008 was just their golden opportunity, and we all know they never waste a crisis.  You can't have a giant middle class like the US has (had) with so much power and independence.  You gotta TAKE that shit from them and fucking RULE THEM like real leaders do.  Those middle class bastards need to be slapped down HARD.  They need to be reminded who is in charge.  They need to be reminded who can come in a crush them like a bug at a moment's notice.  They need to be CONTROLLED.  They need to be HERDED.  And if desired, they need to be stripped of everything and killed to make this point clear (I'm getting ahead of myself- that part is yet to come).

No more "nicey-nice" democracy, equal-protection-under-the-law crap we were taught in school.  This is gloves-off, bare-knuckles power-grab time.  First to the top rules.  Doubt me?  Show me ANYTHING about what our government is doing now that would refute what I'm saying.  Name ONE FUCKING THING.  I'll wait.

"But that's not fair!"  Yeah, so fucking what?  Who's gonna stop them?  You?

I don't mean to give it to you with both barrels on a personal level.  Not my intention to make enemies here.  But Jesus, just look around you.  Is it not obvious where we ACTUALLY are right now and where we are ACTUALLY heading?  This is not something that's just begun, it's something that has been nearly completed.  Only the flesh will need to be put on the bones of the architecture they have nearly completed in the coming years.

LetThemEatRand's picture

I'm kind of slow.  Unfortunately, the vast majority of the world's population isn't even on the road and those who are, are in reverse.

kliguy38's picture

now that is one big pile of steaming shit...........that just happens to be absolutely spot on 100% true....

NoDebt's picture

Thanks for the kind words.  I was just clearing my throat.  Full-song a little later, maybe.

SAT 800's picture

There is no real hard cold cash; hard cold cash cannot be printed. they attempted to re-inflate the bubble, because they like to play in the bubble.

LetThemEatRand's picture

Nothing wrong with blowin' bubbles when you get to keep the soap.

wisehiney's picture

Bonds, precious, what sells next?

SAT 800's picture

"What sells next" doesn't matter. buy what has been sold that has enduring value; eg; silver bullion.

wisehiney's picture

It is also pretty cool to raise funds for precious by trading other markets.

SAT 800's picture

What I do. Not sure if it is cool. However, it is smart.

wisehiney's picture

So maybe it DOES matter what sells next?

SAT 800's picture

It does matter; but it's no use wondering what it will be; and it's disastrous to pontificate. After the mass sells it in panic it will be time enough to buy it; whatever it is.

Go Tribe's picture

Is ther easy thing in Europe worth buying? There must be some pretty desperate sellers by now.

SAT 800's picture

Be patient, Chipmunk; not yet.

SAT 800's picture

Clearly, capital flight is occuring. Smart people who do their homework; or hire people who do, are removing Euros from the system and putting them otherwhere. Many, mistakenly, in the US Stock Market; some in bullion.

Wile-E-Coyote's picture

I live in Europe. Yeah lucky me, I can assure you we are fucked.

Major civil unrest around the corner, and I mean the type people get killed. Not that I will be killing anyone; NSA. I like flowers and shit you know peace man.

LetThemEatRand's picture

We could all riot, but that would be wrong.

NoDebt's picture

How do you say "EBT Card" in European?  Le EBT Card?  ;)

When those stop working, I agree with you.  It's not just there, it's here in the US, too (though I admit you have more "dry powder" to blow up over there with 60%+ youth unemployment across the southern fringe).

Continuing Bread and Circuses.  When they stop, reality immediately returns and the real violence begins.

ekm's picture

People have to focus on the reason why we have money.


There can never ever ever ever have credit expansion if the interest rates are zero or close to zero, never ever ever ever ever ever. It's simply how a fiat money system was intended to work.


Increase rates at 5% and you'll see credit creation immediately, but not before few banks go into oblivion

OpenThePodBayDoorHAL's picture

Ding ding ding we have a winner. Seems counterintuitive to these monetarists but what we urgently need is higher rates. Sweep away the bad stuff already and get back to growing productivity. Corporate welfare queens from GOOG to AAPL to Lockheed Martin & Boeing need to lose their EBT cards. Let retirees and insurance earn something again at whatever good banks are still standing. Peace & prosperity.


(OK I just woke up from my fantasy. I know just as you do that we will continue with the wars: on people, on privacy, on savers, on drugs, on C02, on everything. America = WAR).