Bulls and bears on the economy both have a case to make based on recent data
on bank lending. On the bull side of the ledger, bank loans and bank credit
continue to grow strongly, suggesting continued economic expansion. Moving
toward a bearish condition but not quite fully developed yet is the recent
trend in commercial and industrial loans, which have been growing more slowly
of late.
For the near-term economic outlook, the overall extension of bank
credit matters more, but as a leading indicator, the slowing in business
borrowing could be significant. It is early on this call, but this is a
development that should be watched closely for signs that businesses might
be losing confidence in the economic expansion.
At $1.197 trillion, the total amount of commercial and industrial loans
is just $1.2 billion below its record high, but the pace of gains for these
loans has slowed. In both 2005 and 2006, C&I loans increased 12.8%, gains
that were a harbinger of steady economic expansion. Over the past two
months, however, C&I loans have contracted by $1.2 billion, with the peak
set in the week ended Dec. 20, 2006.
Capital spending has fallen in two of the past three quarters. Bulls will
say that the slowdown was in response to worries about high energy costs and
plunging home sales, factors that have stabilized of late. Bears will say
that concerns on these matters are lingering, especially now that the bulk
of the fallout from last year's plunge in home sales may be just beginning.
Whatever the case, if C&I loans stay weak, it is likely that business
spending will stay weak, too. This bears watching.
The data are released
by the Federal Reserve every Friday at 4:15 p.m. ET.
P.S. Will you be there when Cramer makes his next move?
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Tony Crescenzi Blog Keys to the Week Ahead 2/23/2007 4:26 PM EST Here are the data releases that'll be making headlines next.
Tony Crescenzi is the chief bond market strategist at Miller Tabak + Co., LLC, and advises many of the nation's top institutional investors on issues related to the bond market, the economy and other macro-related issues. At the request of the Federal Reserve, Crescenzi is a regular participant in the board's Livingston Survey of economic forecasters. He is also the author of the revised investment classic, The Money Market,
first published in 1978 by Marcia Stigum, and The Strategic Bond Investor. At the time of publication, Crescenzi or Miller Tabak had no positions in the securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Crescenzi also is the founder of Bondtalk.com, a popular Web site covering the bond market and the economy. Crescenzi appreciates your feedback; click here to send him an email.
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