Latest data from the European Central Bank (ECB) show that in July 2025, the euro area's broad money supply (M3) increased by 3.4% year-on-year, slightly higher than June's 3.3%, extending the recent moderate upward trend. At the same time, narrow money (M1) accelerated noticeably, while credit demand from households and businesses continued to recover, suggesting that liquidity conditions in the euro area remain accommodative.

1. Modest Increase in Money Supply Growth

In July, M3 grew 3.4% year-on-year, up 0.1 percentage points from June. The average growth rate for the three months from May to July reached 3.5%, indicating overall monetary stability.

M1—which includes currency in circulation and overnight deposits—rose sharply, with growth accelerating from a revised 4.7% in June to 5.0% in July, reflecting stronger short-term liquidity demand.

Other short-term deposits (M2-M1) remained in negative territory at -0.8%, though this marked an improvement from June's -1.0%. Meanwhile, marketable instruments (M3-M2) slowed significantly, with growth falling from 10.4% to 6.4%, possibly indicating a shift in investor preferences away from longer-term financial products.

2. Diverging Deposit Trends Across Sectors

Deposit flows showed clear differences across sectors:

Household deposits rose 3.4% year-on-year (3.3% in June), maintaining steady growth.

Deposits of non-financial corporations accelerated markedly, jumping from 1.6% in June to 2.7%.

Deposits held by investment funds (excluding money market funds) decelerated sharply, from 13.1% to 6.3%.

3. Ongoing Expansion in Private Sector Credit

Credit to non-monetary financial institutions (non-MFIs) increased 2.1% year-on-year in July, compared with 2.0% in June. Within this, credit to the private sector grew by 2.7%, unchanged from the previous month.

Adjusted loan data—excluding transfers and notional cash pooling effects—showed further momentum:

Loans to households accelerated from 2.2% to 2.4%.

Loans to non-financial corporations edged up from 2.7% to 2.8%.

This points to a continued recovery in financing demand among households and businesses.

4. Asset-Side Developments Behind M3

On the asset side, the main contributors to M3 growth were as follows:

Claims on the private sector contributed 2.6 percentage points (unchanged from June).

Net external assets contributed 1.9 percentage points (down from 2.4%).

Claims on the general government added 0.2 percentage points (0.0% in June).

Longer-term financial liabilities subtracted 1.1 percentage points (also unchanged).

5. Outlook

July's figures indicate that both M3 and M1 growth picked up moderately, while credit demand from households and non-financial corporates continued to expand. Although growth in marketable instruments slowed, overall liquidity conditions remain supportive of economic recovery.

The ECB is expected to continue monitoring monetary growth and credit developments closely to ensure effective policy transmission and safeguard its objectives of price stability and sustainable growth in the euro area.

Note: All data are adjusted for seasonal and calendar effects. “Private sector” refers to euro area residents excluding monetary financial institutions and government. Data are as of July 2025, published by the European Central Bank and translated by the Deutsche Bundesbank.