NEW bank loans in China fell more than expected to the lowest in 22 months in October, but the drop was likely due to seasonal factors, and policymakers are still expected to ramp up support for the cooling economy in coming months.

Chinese banks extended 661.3 billion yuan (US$94.55 billion) in new yuan loans in October – the weakest since December 2017, data from the central bank showed late Monday, down sharply from September and falling short of analyst expectations.

Analysts polled previously had predicted new yuan loans would fall to 800 billion yuan in October, down from 1.69 trillion yuan in September. Household loans, mostly mortgages, fell to 421 billion yuan in October from 755 billion yuan in September, while corporate loans dipped to 126.2 billion yuan from 1.01 trillion yuan.

“The data reflects weaker demand for credit from companies as their confidence has been affected by the trade tensions,” said Nie Wen, a Shanghai-based economist at Hwabao Trust.

Regulators have been trying to boost bank lending and lower financing costs for over a year, especially for smaller and private companies which generate a sizeable share of the country’s economic growth and jobs.

But domestic demand remains sluggish as investment and consumption weakens.

“We think the central bank will need to loosen policy more aggressively in the coming months in order to drive a turnaround in credit growth and prevent economic activity from slowing too abruptly,” Julian Evans-Pritchard at Capital Economics said in a note.

Broad M2 money supply in October grew 8.4 percent from a year earlier, central bank data showed, matching estimates of a forecast in the previous poll. It rose 8.4 percent in September.

Outstanding yuan loans grew 12.4 percent from a year earlier. Analysts had expected 12.5 percent growth, in line with September’s 12.5 percent.

Growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, slowed to 10.7 percent in October from a year earlier and from 10.8 percent in September.

In October, new TSF tumbled to 618.9 billion yuan – the lowest since July 2016 – from 2.27 trillion yuan in September. Analysts polled previously had expected 1 trillion yuan.(SD-Agencies)