Eurozone M1 Growth Accelerates to 5.1% in May 2025

The European Central Bank (ECB) released its latest monetary developments report on June 30, 2025, offering a comprehensive view of liquidity and credit trends within the euro area. The data for May 2025 highlights significant movements in household and corporate lending, as well as shifts in deposit structures, providing valuable insights into the region’s financial dynamics.

The broad monetary aggregate M3, which encompasses currency in circulation, overnight and term deposits, and marketable instruments, maintained an annual growth rate of 3.9% in May, consistent with the previous month. This stability reflects a three-month average of 3.8%, indicating a steady monetary environment. The consistent growth in M3 suggests that liquidity remains abundant in the eurozone, influenced by the ECB’s ongoing monetary policy amidst a cautiously improving economic outlook.

Within the M3 aggregate, the narrower monetary aggregate M1, which includes currency in circulation and overnight deposits, experienced a growth rate increase to 5.1% in May, up from 4.7% in April. This acceleration in M1 growth could indicate a heightened preference for liquidity and readily accessible funds among households and businesses. The rise in M1 may be driven by increased consumption, shifts in savings behavior, or precautionary measures in response to economic uncertainties, signaling short-term confidence or caution in spending behavior.

While M1 showed momentum, short-term deposits other than overnight deposits (classified as M2-M1) experienced a slight decline. Their annual growth rate turned negative at -0.1% in May, down from +0.6% in April. This decrease suggests a reallocation of funds from time deposits into more liquid overnight holdings, possibly in anticipation of interest rate changes 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, saw robust growth, increasing to 11.2% in May from 10.7% in April. This indicates a growing appetite for market-based instruments, potentially due to better yields or investment opportunities compared to traditional deposit accounts.

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. This modest increase suggests a gradual recovery in consumer confidence and borrowing demand, which could support spending and real economic activity in the coming months. 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, influenced by financing costs, demand forecasts, or external uncertainties.

The latest data reveals a 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 shape the eurozone’s economic trajectory, these indicators will be closely monitored by policymakers and market participants.