Eurozone March private sector lending negative

FRANKFURT (AFP) - Eurozone bank lending to the private sector improved slightly in March but was still lower compared with year earlier levels, the European Central Bank said. Lending was down 0.2 percent compared with March 2009, a bank spokesman said, better than the decline of 0.4 percent in February but still at a rate that undermines economic recovery in the 16-nation bloc. On Wednesday, the ECB said banks continued to tighten credit conditions in the first quarter and it did not see a clear improvement in the near future. Although the central bank has provided ample amounts of cash, commercial banks still find financing conditions on private equity markets difficult, the ECB said. Credit demand has also remained weak as many companies and households wait for better times before applying for new loans. IHS Global Insight chief European economist Howard Archer warned that even allowing for muted demand for businesses for bank credit, the March ECB lending data maintain concern that eurozone recovery could be held back. He pointed to worries that companies would not be able to get the credit they need. Growth of the ECBs M3 money supply indicator, which measures cash, deposits and various other financial items, declined 0.1 percent in March, slightly better than analysts had expected, after a decline of 0.4 percent in February. Lending and money supply data reflect consumer demand and overall activity in an economy. Falling figures point to lower demand, which normally means inflation will ease and allow the ECB to cut interest rates. However, rates are already at a record low of one percent and are not expected to be cut further. The 16-nation eurozone emerged from recession in 2009 but the recovery is uncertain and leaders must now tackle the sovereign debt crisis in Greece. Higher unemployment and sluggish consumption are posing hurdles meanwhile to growth rates like those seen in Asia and the United States. The eurozone money supply and credit data for March maintain the case for the ECB to tread very lightly over the coming months in gradually withdrawing its emergency liquidity measures, Archer commented.