The annual rate of increase of Private Sector Credit (PSC) declined by half a percentage point to 6 per cent in January 2009, and the non-mortgage credit growth rate, which includes holdings of  securities, declined to 13.6 per cent. The sectoral breakdown of credit in Ireland for December 2008, which is available here, shows continued slowdown in lending to non-financial corporates, with significant sectors such as real estate and construction among these.

The Central Bank says prior to 2007, January was typically one of the weakest months in terms of residential mortgage lending. However, in January 2009 the net increase in residential mortgages (including securitised mortgages) of €350 million was equal to the total for the final quarter of 2008. Despite its relative strong rise in January, the outlook for mortgage lending is uncertain as the Irish results of the euro area bank lending survey indicate that demand for loans to households during the first quarter of 2009 is expected to decline.

Source: Central Bank and Financial Services Authority of Ireland

Money market interest rates fell sharply again in January. The largest decrease was in the overnight rate, which fell by 108 basis points, while the 3-month rate declined by 80 basis points, and the 12-month rate by 78 basis points. Funds provided by the Bank as part of the ECB’s monetary policy operations increased by €2.6 billion in January, with a fall of €3.3 billion in main refinancing operations being more than offset by a rise in longer-term refinancing operations. The euro depreciated significantly against the US dollar, sterling and the Japanese yen in January, by 7.9 per cent, 5.7 per cent, and 8.8 per cent respectively.

Exchange-rate movements resulted in a 0.25 per cent decrease in Ireland's average nominal harmonised competitiveness indicator (HCI - -

Total lending by credit institutions in Ireland to non-Government Irish residents increased by €3.3 billion in January to €395.7 billion. Non-euro denominated lending accounted for almost all of the increase in PSC. Lending to non-bank IFSC companies rose by €1.2 billion over the month.

The changes in the main PSC loan categories on credit institutions’ balance sheets in January were as follows:

Credit institutions in Ireland accounted for €208 billion of the euro area’s broad money supply (M3) in January, a monthly decrease of €9.3 billion, or 4.3 per cent. As a result, the annual fall in M3 in January was 6.7 per cent, from a revised decrease of 1.9 per cent in December.

Holdings of euro area debt securities with up to two years maturity by Irish MFIs (Monetary Financial Institutions), which are netted out of the money supply contribution, rose by €7.6 billion in January, while debt securities issued by Irish MFIs increased by €1.4 billion, giving a net decline in debt securities of €6.1 billion. In addition, deposits with up to two years maturity declined by €6.2 billion over the month. One factor contributing to the decline in deposits was the classification of Irish credit unions as ‘credit institutions’ from 1 January 2009. As a result, credit union deposits were reclassified – from non-MFI to MFI deposits – which removed them from the money supply measure. An increase in currency issued partly offset these declines.