February 27, 2020 / 9:44 AM / a month ago

UPDATE 1-Euro zone business lending still weak amid slowdown

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FRANKFURT, Feb 27 (Reuters) - Lending to euro zone companies held at a two-year low last month even as lending to households hit yet another post-crisis high, European Central Bank data showed on Thursday, highlighting a growing divergence in the bloc’s economy.

Struggling under the weight of a global trade war and a manufacturing recession euro zone exporters have suffered, but services and consumer spending have remained resilient, buffering the economy during its two-year slowdown.

Hoping to stop the spread of economic gloom, the ECB has thrown further stimulus at the bloc’s economy, all in the hope of keeping borrowing conditions low so lenders would keep credit flowing to firms.

Still, lending growth to businesses has slowed for much of last year and held steady at 3.2% last month, as a slowdown in Germany offset better lending growth in Italy, France and Spain.

In Germany, the bloc’s biggest country, unadjusted corporate lending eased to 5.6% from 6.5%, while in Italy, one of the weakest performers in the euro zone, corporate lending contracted by 4.5%, an improvement compared with the minus 5.3% a month earlier.

Households fared better, as lending picked up to 3.7% from 3.6% in December, the highest rate since December 2008 and continuing a near steady acceleration that started five years ago.

In measures targeted specifically at lending, the ECB regularly provides banks with ultra-cheap, long-term funds and exempted much of their extra cash from its punitive charge on excess reserves.

The annual growth rate of the M3 measure of money supply, which often serves as an indicator of future activity, picked up to 5.2% from 4.9%, underperforming expectations for 5.3% in a Reuters poll. (Reporting by Balazs Koranyi; Editing by Alex Richardson)

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