Monetary developments in the euro area: May 2023

28 June 2023

• Annual growth rate of broad monetary aggregate M3 decreased to 1.4% in May 2023 from 1.9% in April
• Annual growth rate of narrower monetary aggregate M1, comprising currency in circulation and overnight deposits, was -6.4% in May, compared with -5.2% in April
• Annual growth rate of adjusted loans to households decreased to 2.1% in May from 2.5% in April
• Annual growth rate of adjusted loans to non-financial corporations decreased to 4.0% in May from 4.6% in April

Components of the broad monetary aggregate M3

The annual growth rate of the broad monetary aggregate M3 decreased to 1.4% in May 2023 from 1.9% in April, averaging 1.9% in the three months up to May. The components of M3 showed the following developments. The annual growth rate of the narrower aggregate M1, which comprises currency in circulation and overnight deposits, was -6.4% in May, compared with -5.2% in April. The annual growth rate of short-term deposits other than overnight deposits (M2-M1) increased to 22.5% in May from 21.0% in April. The annual growth rate of marketable instruments (M3-M2) increased to 24.2% in May from 21.5% in April.

Chart 1

Monetary aggregates

(annual growth rates)

Looking at the components' contributions to the annual growth rate of M3, the narrower aggregate M1 contributed -4.7 percentage points (down from -3.8 percentage points in April), short-term deposits other than overnight deposits (M2-M1) contributed 5.0 percentage points (up from 4.7 percentage points) and marketable instruments (M3-M2) contributed 1.1 percentage points (up from 1.0 percentage points).

From the perspective of the holding sectors of deposits in M3, the annual growth rate of deposits placed by households decreased to 1.3% in May from 1.6% in April, while the annual growth rate of deposits placed by non-financial corporations decreased to 0.4% in May from 1.2% in April. Finally, the annual growth rate of deposits placed by non-monetary financial corporations (excluding insurance corporations and pension funds) was -5.9% in May, compared with -4.8% in April.

Counterparts of the broad monetary aggregate M3

As a reflection of changes in the items on the monetary financial institution (MFI) consolidated balance sheet other than M3 (counterparts of M3), the annual growth rate of M3 in May 2023 can be broken down as follows: credit to the private sector contributed 2.1 percentage points (down from 2.4 percentage points in April), net external assets contributed 1.2 percentage points (up from 0.7 percentage points), credit to general government contributed -0.9 percentage points (down from -0.3 percentage points), longer-term financial liabilities contributed -1.3 percentage points (down from -1.0 percentage points), and the remaining counterparts of M3 contributed 0.3 percentage points (up from 0.1 percentage points).

Chart 2

Contribution of the M3 counterparts to the annual growth rate of M3

(percentage points)

Credit to euro area residents

As regards the dynamics of credit, the annual growth rate of total credit to euro area residents decreased to 0.9% in May 2023 from 1.5% in the previous month. The annual growth rate of credit to general government was -2.2% in May, compared with -0.8% in April, while the annual growth rate of credit to the private sector decreased to 2.2% in May from 2.5% in April.

The annual growth rate of adjusted loans to the private sector (i.e. adjusted for loan sales, securitisation and notional cash pooling) decreased to 2.8% in May from 3.3% in April. Among the borrowing sectors, the annual growth rate of adjusted loans to households decreased to 2.1% in May from 2.5% in April, while the annual growth rate of adjusted loans to non-financial corporations decreased to 4.0% in May from 4.6% in April.

Chart 3

Adjusted loans to the private sector

(annual growth rates)

Notes:

• Data in this press release are adjusted for seasonal and end-of-month calendar effects, unless stated otherwise.
• "Private sector" refers to euro area non-MFIs excluding general government.
• Hyperlinks in the main body of the press release and in annex tables lead to data that may change with subsequent releases as a result of revisions. Figures shown in annex tables are a snapshot of the data as at the time of the current release.