ECB Data Highlights Shifting Deposit Behaviors Amid Economic Uncertainty

In its latest monetary developments report released on June 30, 2025, the European Central Bank (ECB) provided a detailed picture of liquidity and credit trends within the euro area. The data for May 2025 reveals steady expansion in broad money supply, with notable movements in household and corporate lending, and shifts within deposit structures, offering key insights into the region’s evolving financial dynamics.

Stable M3 Growth Points to Consistent Liquidity Conditions

The broad monetary aggregate M3, which includes currency in circulation, overnight and term deposits, as well as marketable instruments, posted an annual growth rate of 3.9% in May, unchanged from April. This reflects a three-month average of 3.8%, indicating a relatively stable monetary environment. 

The steadiness of M3 suggests that liquidity remains ample in the eurozone, a trend likely shaped by the ECB’s ongoing monetary policy stance amid a cautiously improving economic landscape.

M1 Growth Accelerates, Driven by Cash and Overnight Deposits

Within M3, the narrower monetary aggregate M1, comprising currency in circulation and overnight deposits, saw its growth rate climb to 5.1% in May, up from 4.7% in April. This increase could suggest a higher preference for liquidity and readily accessible funds among households and businesses. 

Whether driven by increased consumption, savings shifts, or precautionary behavior in response to economic uncertainties, the sharp rise in M1 is a notable trend that often signals short-term confidence or caution in spending behavior.

Deposits Shift: Short-Term Holdings Decline

While M1 showed momentum, short-term deposits other than overnight deposits (classified as M2-M1) declined slightly. Their annual growth rate dropped into negative territory at -0.1% in May, compared to +0.6% in April. This fall might reflect a reallocation of funds from time deposits into more liquid overnight holdings, potentially in anticipation of changes in interest rates or as a response to evolving financial market conditions.

In contrast, marketable instruments (M3-M2), which include money market funds and other highly liquid financial instruments, grew robustly, increasing to 11.2% in May, up from 10.7% in April. This indicates a growing appetite for market-based instruments, possibly due to better yields or investment opportunities compared to traditional deposit accounts.

Household Loans Inch Up, Corporate Credit Growth Softens

On the credit front, the ECB reported that adjusted loans to households rose at an annual pace of 2.0% in May, slightly up from 1.9% in April. The uptick, though modest, suggests a gradual recovery in consumer confidence and borrowing demand, which could support spending and real economic activity in the months ahead.

Meanwhile, adjusted loans to non-financial corporations saw a slight slowdown, with growth easing to 2.5% from 2.6%. Although still positive, the slight deceleration may reflect caution among firms regarding expansion or investment, possibly influenced by financing costs, demand forecasts, or external uncertainties.

Looking Ahead

The latest data paints a picture of measured monetary expansion in the euro area. With M1 gaining pace, broad money remaining stable, and credit flows showing nuanced shifts, the ECB’s monetary indicators for May 2025 point to a delicate balance between recovery and restraint. 

As inflation trends, rate policies, and geopolitical dynamics continue to influence the eurozone’s economic trajectory, these indicators will be closely watched by policymakers and market participants alike.