Lending to households and companies in the 17-nation euro area contracted for the first time in more than two years in May as the sovereign debt crisis curbed demand for credit.
Loans to the private sector declined 0.1 percent from a year earlier after gaining an annual 0.2 percent in April, the Frankfurt-based European Central Bank said today. That's the first contraction since March 2010. From April, loans fell 0.1 percent for their fourth straight monthly drop.
“This is not good news,” said Thomas Costerg, an economist at Standard Chartered Bank in London. “There's a lack of demand and a lack of supply, and it's further supporting evidence for an ECB rate cut next week.”
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