In looking for signs of impact from the credit crisis, one place to look is the Federal Reserve's weekly report on commercial and industrial loans. In theory, a tightening of credit conditions should reduce the availability of loans, while the slower economy should reduce the demand for such loans.
Both factors appear to have had only modest impact in recent months, as evidenced by the fact that commercial and industrial loans have increased at a 22% pace since the end of July 2007. Recent weeks have been weaker, with business loans increasing at a sluggish 1% pace over an eight-week stretch. Still, in the context of strength in the prior months, commercial and industrial lending activity has not fallen as much as theories would dictate.
The resilience of commercial and industrial lending activity has actually been impressive when you consider that during the 2001 recession, C&I loans fell about 8% and that in the following year C&I loans fell another 10%.
Some of this "resilience" reflects difficulties in the credit markets, with entities turning away from the capital markets to the banking sector for capital, but that the spigot is flowing at all will surprise many who are expecting nothing short of a complete freeze.
Tony Crescenzi Blog Keep Buying Dips 5/12/2008 11:21 AM EDT The recent drop in the Dow does not seem to have been caused by the credit situation.
Tony Crescenzi Blog Keys to the Week 5/12/2008 9:31 AM EDT The next five days will have lots of economic data; here's what to watch for.
Tony Crescenzi Blog The Turn in Housing 5/9/2008 3:05 PM EDT A look ahead tells us that inventories must fall in 2009.
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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