Macro roundup: Lending growth steadies
Greek banks' credit expansion channelled mostly to businesses
Growth in Greek bank lending to the private sector has plateaued in the last few months, after hitting levels last seen in 2009.
The annual rate of credit expansion in January was 5.7 percent for the private sector as a whole, dipping from 6.3 percent the month before. For non-financial corporations, lending grew 10.6 percent in January, whereas credit to households contracted 2.4 percent.
It remains the case that the credit contraction for households is down to the still-depressed levels of mortgage lending. Consumer lending turned positive near the start of last year, and has remained so, increasing 1.8 percent in January. However, the latter category only constitutes 22 percent of the banks’ total stock of household debt.
Recently we’ve taken longer-term looks at a few indicators. This is a as good a time as any to also track the its evolution of credit growth over a longer horizon.
The big difference between now and the pre-financial crisis credit boom — when lending growth was in the order of 20 percent over several years — is that business lending is now driving the expansion. Back then, business lending lagged, while lending to households fuelled a housing bubble.
Greece’s apartment prices are again growing at a rapid rate. Whether this growth is putting them in back in bubble territory is a subject worth its own post soon. But the one thing the lending data shows is that if the real estate bubble is in a bubble, it is not a debt-fuelled one this time around.
Meagre returns
On the other side of the ledger, private sector deposits held at Greek banks fell by 4.5 billion euros in January — the biggest single-month drop since June 2015, just before the introduction of capital controls to stem a bank run — to 184.1 billion euros.
Although the drop seems large, it’s worth bearing in mind that there is usually a season drop in deposits in January after a seasonal rise in December. This January’s drop was smaller than the 5 billion euros increase in deposits the month before. That, in turn, was the biggest single-month increase since December 2012.
Meanwhile, Bank of Greece data for January showed that the spread in interest rates between new loans and deposits continued to widen.
The weighted average interest on new loans increased to 5.36 percent from 5.06 percent the month before, while for new deposits it rose to 0.12 percent from 0.1 percent. The resultant spread of 5.24 percent is the highest its been in the data series, which goes back to 2003.
It’s normal that when central banks are in a tightening cycle, lending rates go up much sooner than deposit rates. We looked at this a few weeks ago, and it’s not just a Greek issue — there was a interesting discussion of this, in a U.S. context, on Joe Weisenthal and Tracy Alloway’s Odd Lots podcast recently.
However, with Greece’s banks set to report strong profits (Piraeus Bank, the first to report, made a net profit of 899 million euros last year, aided by a sharp pickup in net interest margins in the last two quarters), I expect it won’t be long before this becomes a hot political issue.
Other data
The seasonally-adjusted unemployment rate dropped to 10.8 percent in January from a revised 12.4 percent in December.
Against that, Labour Ministry data showed that there were 27,611 fewer hirings in January than people leaving their jobs. Seasonal factors mean that January usually sees the hiring balance in deficit — though this year’s is the most for the month since 2017. Last year, the employment deficit in January was 25,804.
Retail sales increased 8.8 percent from a year earlier in December, compared with a 12.6 percent increase the month before. However, retail volume decreasing 1.2 percent in December, compared with a rise of 1.1 percent in November.
Greek economic sentiment overall improved in February, even as consumer confidence worsened. Industry, retail and construction were the sectors that marked improvement, according to the European Commission’s economic sentiment indicator.
Operating conditions in manufacturing marked their first improvement in eight months in February, according to S&P Gobal’s manufacturing PMI. February’s reading increased to 51.7 from 49.2 the month before. A reading above 50 indicates improving conditions.
Building activity in November, as measured by the number of permits issued, increased 9 percent from the same month a year earlier. In the first 11 months of last year, it rose 3.9 percent compared with the same period of 2021. However, surface area and volume both declined.
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Next week’s key releases
Tuesday, March 7:
Fourth-quarter gross domestic product (Elstat)
Friday, March 10:
January industrial production (Elstat)
January commercial transactions (Elstat)
Elsewhere on the web
Politico’s Nektaria Stamouli interviews the investigator pursuing Greece’s spyware scandal.
Sticking with Politico, here’s a profile of the rise and fall of Eva Kaili, who is at the centre of the “Qatargate” scandal in Brussels.
This FT Alphaville guest post, on the important behind-the-scenes-role of the IMF’s Standards, Policy and Review department, was quite an eye-opener for me.
Finally, a tale of debt restructuring, money markets and insider trading in 6th century BC Athens:
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In the flow of funds data, right? Yes, that will be interesting to see when it comes out for the first quarter.
Hey Marcus, well-documented as always.
Given the drop in depos and rising interest rate spread, I would expect that part of the money has been channeled to securities (especially greek t-bills, yielding > 2%). BoG tracks such numbers, but with a substantial lag, so this will remain just a hunch for some time.
As for the link, I can only tip my hat in appreciation. 🎩