Market Economics | Interest Rate Strategy - BNP PARIBAS ...

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Chart 15: Eurozone M3 & Bank Lending (% y/y)
12.5
10.0
7.5
5.0
2.5
0.0
Private Sector
Bank Lending
M3
-2.5
92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
Source: Reuters EcoWin Pro
% y/y Dec (f) Nov Oct Sep
M3 2.0 1.9 0.9 1.1
M3 (3-mth Avg.) 1.6 1.3 1.0 0.8
Private Sector Loans 2.3 2.0 1.5 1.3
Key Point:
Rates of growth in M3 and bank lending are low by
past standards but are trending higher.
BNP Paribas Forecast: Low But Rising
Eurozone: Monetary Developments (December)
Release Date: Friday 28 January
The y/y growth rate in M3 accelerated to its strongest level
in fifteen months in November, rising from 0.9% to 1.9%.
This was driven, in part, by base effects. The three-month
average y/y rate of growth rose for the seventh successive
month but to a less elevated 1.3%.
The y/y growth rate in private sector bank lending rose to a
20-month high in November, from 1.5% to 2.0%. The m/m
rise of 0.7% was the biggest since before the intensification
of the financial crisis (March 2008 to be precise). The y/y
rate of change is almost three percentage points above its
trough in October 2009 (of -0.8%).
Loans to households have been the main driver of the pickup,
though the rate of growth has lost some momentum in
recent months. The y/y rate of increase slipped to 2.7% in
November and has been going sideways for the past three
quarters. Lending for mortgages has been robust, rising by
over 3% y/y since May 2010, while consumer credit has
continued to contract on a y/y basis.
Lending to the non-financial corporate sector is lagging that
for households, as is typically the case. The rate of decline
has moderated, however, to -0.1% y/y in November.
Looking beyond special factors, the ECB continues to view
M3 and lending growth rates as “low”.
Source: Reuters EcoWin Pro
Chart 16: US: Final Demand
Q4 (a) Q3 Q2 Q1
GDP % q/q AR 2.9 2.6 1.7 3.7
GDP Deflator % q/q AR 1.5 2.1 1.9 1.0
Key Point:
The moderate 2.9% q/q saar gain in overall GDP we
expect would reflect a 4.4% surge in final demand
and a 1.5pp drag from inventories.
BNP Paribas Forecast: Strong Final Demand
US: GDP (Q3a 2010)
Release Date: Friday 29 October
GDP is forecast to grow 2.9% q/q saar in Q4, up from 2.6%
in Q3. The tone of the report should be much stronger than
the headline suggests, however, as inventories are
expected to subtract 1.5pp from growth while final demand
is forecast to surge 4.4%. The reading would represent the
first time since the recovery began that final demand grew
at a pace above the economy’s potential (see chart).
For the year as a whole, final demand will have risen 1.9%.
Trade is expected to contribute 1.7pp to growth after
subtracting an average 2.6pp over the prior two quarters.
Consumer spending is also expected to surge 3.5%, on
strong holiday spending. Meanwhile, government should
be subdued as contraction in state and local government
spending nearly offsets surging federal outlays on defence.
Equipment and software spending is expected to grow at a
more moderate pace while both commercial and residential
real estate should post modest declines. The GDP deflator
is expected to rise 1.5%, which would lead to reasonably
healthy nominal GDP growth of 4.4%, similar to the prior
quarter.
Market Economics 20 January 2011
Market Mover
78
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