On a quarterly basis the ECB publishes its euro area bank lending survey. This provides a wealth of information on the financial supply side (credit standards applied by banks) as well as the financial demand side (drivers of recent loan demand, expected demand for loans) of the Eurozone. The survey is a key complement to more traditional ‘hard’ data (activity, production, sales, etc) and ‘soft’ data (confidence and sentiment indicators).

Recently there has been quite a bit of concern about the repercussions of the slowdown in China and more broadly the developing economies on the Eurozone. Potential spillover channels are international trade, the exchange rate, business confidence. Closely related to this one is the uncertainty channel: companies may feel surprised about the way things have unfolded in China, Brazil etc and hence be more uncertain about how they assess the future.

The vertical bars in the accompanying chart show how banks in the ECB lending survey assess the recent demand for company loans for fixed investment purposes. For two quarters in a row we are in positive territory, so there are more banks which consider that demand for this specific type of loans has increased in the past three months than there are banks which see a decline.


The line in the chart shows the percentage change compared to the year before of real gross fixed capital formation. Growth has been positive since the end of 2013 and after slowing in the second half of 2014, has picked up again. Unsurprisingly there is a high correlation between the assessment by banks of loan demand for investment purposes and gross fixed capital formation. The recent bank lending data warrant some optimism for the near term as far as capital expenditures are concerned. However, 2011 is a reminder of how the environment can suddenly change when shocks occur (back then it was the Eurozone crisis).

23 October 2015