FRANKFURT--Private-sector lending improved somewhat in the euro zone in June though it remained below year-ago levels, the European Central Bank said Friday, suggesting that credit conditions are slowly starting to improve which may in turn boost the region's economic growth outlook.

Loans to households and businesses were down 1.7% compared with a year earlier, the ECB said in its monthly report. That compares with a 2% annual decline in May. The improvement from May reflects a slight pickup in lending to households and a more modest drop in business lending.

The broadest measure of money supply, M3, increased 1.5% from a year earlier, exceeding economists' expectations of a 1.2% rise. The three-month average, which irons out some monthly fluctuations, was 1.1%.

Though an improvement from May, that was below the reference value of 4.5% that the ECB considers consistent with its goal of maintaining an annual average medium-term inflation rate of just under 2%.

In June, the euro-zone inflation rate was 0.5%.

In late 2011 and early 2012, the ECB pumped more than EUR1 trillion in three-year loans into euro-zone banks. While this helped avert a credit crunch, the loans failed to stimulate much additional lending to households and companies. ECB officials hope that a new lending program will do more to channel ECB loans into the private sector.

Starting in September, the ECB will lend money at four-year maturities to banks at very low interest rates. But there is a new caveat: to keep the loans, banks must show that they are increasing their lending to companies.

Monica Houston-Waesch contributed to this article.

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

(END) Dow Jones Newswires

July 25, 2014 05:55 ET (09:55 GMT)

Copyright (c) 2014 Dow Jones & Company, Inc.