FRANKFURT (Reuters) - Euro zone lending growth held steady last month, a seemingly benign reading for European Central Bank policymakers, but national figures show a growing divide between the currency bloc’s core and periphery.
Lending to companies soared in France and Germany last month but it contracted in Italy and Spain, making it increasingly difficult for the ECB to set policy for a heterogeneous bloc.
With the euro zone economy struggling for much of the past year, the ECB has already flagged more policy easing and the only question is whether it pulls the trigger at Thursday’s policy meeting or wait until September.
But the scope of its move is likely to generate heated debate as views on the slowdown diverge as much as hard data.
(GRAPHIC: Corporate lending in the euro zone's four largest economies - tmsnrt.rs/2MaWzWW)
ECB data showed corporate lending grew by 7.4% in France and 7.1 percent in Germany in June, even as the latter’s vast manufacturing sector struggled with a lengthy recession.
In contrast, lending to companies in Italy and Spain shrank by 1.3% and 1.7% respectively.
This divergence was also visible in household lending data although it was less marked.
(GRAPHIC: Lending to households in the euro zone's four largest economies - tmsnrt.rs/2Mb8DYc)
Opponents of further ECB easing point out that the economy has appeared to stabilize in recent months, with confidence indicators steadying, unemployment still falling and the ECB’s own lending survey pointing to modest but steady activity ahead.
But manufacturing appears to be in a downward spiral, a key survey showed on Wednesday, raising fears that it would eventually infect the rest of the economy and drag overall growth even lower.
“The manufacturing sector in the euro zone is switching more and more to crisis mode,” Commerzbank said in a note to clients. “Although the services sectors have performed markedly better, today’s data is another reason for the ECB to announce new expansionary measures at its meeting tomorrow.”
Reporting by Balazs Koranyi and Francesco Canepa; Editing by Gareth Jones