The last three months of 2021 saw a small pickup in credit growth to the private sector, but there was also a mysterious collapse in lending to small- and medium-sized enterprises in December.

Lending to the private sector overall increased at annual rate of 1.3 percent in December, up from 1.2 percent a month before and 0.8 percent in September. For non-financial corporations, credit growth rose to 3.8 percent.

But net flows to SMEs came to a 849 million-euro drop in lending in the month of December, the most since July 2015 — when Greek banks shut down for three weeks and capital controls were introduced. A 3.5 percent annual expansion in credit to SMEs in November turned into a 1.2 percent contraction last month.

Net lending flows to all non-financial corporations in December, including SMEs, amounted to 2.2 billion euros.

I don’t know the reason for this collapse, but my first guess would be perhaps that working capital credit facilities to SMEs extended during the lockdowns in 2020 expired. If this is indeed the case, then hopefully an improving economy meant they were no longer required.

Meanwhile, if anyone knows of any reasons for the drop, I’d love to hear from them.

Mediterranean diet

Earlier this month, I promised you a deeper dive into Greece’s inflation numbers. So that’s what I did this week.

Broken down to individual items, two-thirds of the 5.1 percent increase in the headline consumer price index came from four different energy components. But a 17 percent increase in the price of olive oil is a prime contributor among the rest.

You can read more here:

Grecology

Breaking down Greek inflation

Greece’s inflation rate is at a decade high. So far it’s still overwhelmingly driven by higher energy prices, but the rising cost of olive oil could end up having more political salience than the price of crude. Whereas at the start of 2021 prices weren’t rising in any of the 12 categories included in the consumer price basket, by the end of the year the…

a year ago · 3 likes · Marcus Bensasson

Other data

Disposable income for Greek households increased 6.2 percent in the third quarter, while consumption grew 9.9 percent. This turned the savings rate negative for the first time since the second quarter of 2020.
Private sector deposits increased by 4.3 billion euros in December to 180 billion euros. Household deposits rose 2.7 billion euros.
Building activity in October, as measured by the number of permits issued, increased 18.4 percent from the same month a year earlier.
The European Commission’s economic sentiment indicator for Greece improved to 114.2 from 110. Consumer confidence also picked up slightly.

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Next week’s key releases

Monday, Jan. 31:

November retail sales (Elstat)

Tuesday, Feb. 1:

January purchasing managers’ index (IHS Markit)
Fourth-quarter bank lending survey (Bank of Greece)

Elsewhere on the web

So we had a bit of snow in Greece on Monday. There’s anger at how it was handled, with thousands stranded for hours on motorways and some homes going days without electricity. But there are great images too, including the Cycladic islands covered in snow, and this drone footage of the Acropolis. Meanwhile, this is how things were still looking here as of this morning:
Marcus Bensasson @mbensass
Arctic expedition to the super market. Made it outside the front gate.
7:46 AM ∙ Jan 28, 2022
28Likes3Retweets
Since we’ve been looking at olive oil this week, here’s a global survey of olive oil producers on the challenges facing the industry.
JPMorgan has agreed to buy a 49 percent stake in Viva Wallet.
Duncan Weldon has a good summary of a BIS paper suggesting that recent inflation is more a result of changing relative prices than a generalised rise.
Cullen Roche says “asking ‘who will buy the bonds’ is like asking ‘who will pick up the printed money’?”. Yup. Admittedly, the bonds he’s asking about are question are U.S Treasuries, not Greek ones! But elements of his argument are also relevant for the European sovereign debt market (as a whole).

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Grecology

Macro roundup: Plunging SME credit