**Euro Area Money Supply Growth Rises as Lending Remains Steady**
The European Central Bank (ECB) has released its latest report indicating an acceleration in the growth of the euro area money supply for June 2026. The report highlights that while the overall money supply has increased, lending to households and businesses has remained largely stable, suggesting a consistent environment for private sector credit.
According to the ECB, the annual growth rate of the broad monetary aggregate M3 rose to 3.3% in June, up from 3.0% in May. This figure was revised down from an earlier estimate of 3.2%. The three-month average growth rate of M3, which encompasses the period leading up to June, was reported at 3.0%. M3 is the ECB's most comprehensive measure of money supply, which includes cash in circulation, overnight deposits, short-term deposits, and marketable financial instruments.
The growth in M3 was primarily driven by an increase in short-term deposits and marketable instruments, despite a slowdown in the narrower measure M1, which consists of cash in circulation and overnight deposits. The annual growth rate of M1 decreased to 3.4% in June, down from 3.7% in May, which had previously been reported at 4.0%. In contrast, short-term deposits excluding overnight deposits, categorized as M2-M1, saw an annual growth of 2.8%, a significant rise from 1.4% in the previous month. Additionally, marketable instruments recorded a robust annual growth of 4.5% in June, compared to 3.2% in May.
In terms of contributions to the overall M3 growth, M1 accounted for 2.2 percentage points, a slight decrease from 2.4 percentage points in May. Short-term deposits other than overnight deposits contributed 0.8 percentage points, an increase from 0.4 percentage points, while marketable instruments provided 0.3 percentage points, up from 0.2 percentage points.
The ECB also examined the deposits held by various sectors of the economy. The annual growth rate of deposits held by households saw a minor decline to 2.6% in June, down from 2.8% in May. Conversely, deposits held by non-financial corporations experienced a notable increase, with annual growth rising to 5.3% in June, compared to 4.2% the previous month. Furthermore, deposits held by investment funds, excluding money market funds, rebounded with an annual growth of 1.6%, recovering from a decline of 0.6% in May.
Looking at the components contributing to M3, claims on the private sector remained the largest factor, contributing 3.1 percentage points to annual M3 growth in June, unchanged from May. Net external assets contributed 2.2 percentage points, an increase from 1.9 percentage points in the previous month. Claims on general government contributed a modest 0.1 percentage points, compared to no contribution in May. However, longer-term liabilities continued to negatively impact M3 growth, contributing minus 1.6 percentage points, slightly worse than the minus 1.4 percentage points recorded previously. The remaining counterparts of M3 contributed minus 0.5 percentage points, showing a slight improvement from minus 0.6 percentage points in May.
The ECB's report also noted that total claims on euro area residents grew at an annual rate of 2.4% in June, remaining unchanged from the previous month. Within this category, claims on general government increased at an annual rate of 0.3%, up from 0.1% in May. Claims on the private sector recorded an annual growth of 3.3%, consistent with the previous month.
Moreover, adjusted loans to the private sector, which exclude the effects of loan transfers and notional cash pooling, grew by 3.9% annually in June, also unchanged from May. Within the private sector, lending to households continued to grow at a steady pace, maintaining an annual growth rate of 3.0% in June, consistent with the previous month. Loans to non-financial corporations also retained their growth momentum, with an annual growth rate of 4.0% in June.
Overall, the latest figures from the ECB indicate that credit conditions in the euro area remained stable in mid-2026. The combination of stronger money supply growth alongside continued lending to households and businesses reflects a resilient economic environment, supporting ongoing private sector activity. As the ECB continues to monitor these trends, the data suggests a cautiously optimistic outlook for the euro area’s economic landscape.