U.S. Outlook Report: Unclogging The Credit Channel
Ever since the financial crisis hit in 2007, the U.S. bank credit channel has been clogged. Endemic weak demand for credit and tightened lending standards have been contributing to lackluster economic growth. The most recent results from the Fed’s Senior Loan Officer Survey for Q3 suggest the era of clogged bank credit may be ending. The survey reveals a broad-based easing of lending standards by commercial banks on the one hand and rising demand for credit from both consumers and businesses on the other. The survey results are another positive sign of the health of the U.S. banking sector, strength of the U.S. consumer, and a growing willingness of firms of all sizes to invest once again in their businesses. The Fed describes the increased demand for credit products as a “broad-based pickup in loan demand”, a bold statement that we haven’t seen in this report for a long time.
On the consumer side, the improvement in loan demand in the latest survey appeared to be more broad-based then we have seen in years. A rising percentage of banks indicated increased demand for auto loans, credit cards, and other consumer loans. A better functioning bank credit channel is good news for everyone, and will help reinforce and sustain this period of above trend U.S. growth.
To find out more of the highlights on recent lending trends check out this week’s U.S. Outlook Report for August 8, 2014.
Tags: economy
