FRANKFURT | Thu Jul 25, 2013 9:37am BST
FRANKFURT (Reuters) - Loans to the euro zone's private sector contracted further in June as lacklustre demand drags on the appetite for investment and spending, while banks restrain lending to repair their balance sheets.
Loans to the private sector shrank by 1.6 percent from the same month a year ago, ECB data released on Thursday showed, a bigger fall than even the lowest forecast in a Reuters poll of economists, which gave a mid-range reading of -1.1 percent.
The latest weak lending figures highlight one of main obstacles to a sustained recovery in the euro zone, where private industry expanded for the first time in more than a year in July.
An ECB survey released on Wednesday showed that euro zone banks, facing tougher capital requirements, tightened lending standards for both companies and home loans in the second quarter even though their access to funding eased.
In a step to reviving lending to the bloc's struggling small- and mid-sized businesses, the ECB said last week it would let banks use more of the assets once blamed for triggering the financial crisis as collateral for cheap loans.
Banks granted non-financial firms 12 billion euros ($16 billion) less in loans in June than in the previous month, data adjusted for sales and securitisations showed, after a fall of 18 billion euros in May.
Euro zone M3 money supply - a more general measure of cash in the economy - grew at an annual pace of 2.3 percent in June, slowing from 2.9 percent in May and below the consensus forecast of 3.0 percent in a Reuters poll of analysts.
($1 = 0.7555 euros)
(Writing by Paul Carrel)
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