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By New_Deal_democrat June 7, 2018 9:46 am
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Gimme more credit: standards tighter for consumers

I wanted to write a little more about the Senior Loan Officers Survey that was released early last month. There are aspects of it that serve as long leading indicators, turning well before the economy as a whole does.



As I pointed out last month, credit for large and medium size firms remains very loose (blue in the graph below).  It remains loose for small firms as well (red): 







There's no sign of the credit contraction we had before the last, big recession.



Interestingly, though, it remains the case that no size of firm is particularly interested in borrowing:







For larger firms, that may be explained by the ability to do stock buybacks and/or to park money overseas. For smaller firms, it remains puzzling that they are turning down easy credit.



Nor are banks increasing spreads to either sized firm:







Turning to consumers, there is less data over any substantial period of time.



Banks' willingness to extend consumer loans is getting close to, but not yet at, the point (approximately +5%) that it has reached about a year before the last 3 recessions:







On the other hand, they have been tightening credit standards for consumer loans and credit cards:







There are a few more series that deal with loans to ordinary consumers, but these typically only date from 2011 and so are of limited value.



Of those we can say that over the last seven years, demand for auto and various consumer loans has weakened:







And banks have been tightening standards for such loans over the same time:







In general, we can say that loan standards for, and demand for loans by, ordinary consumers is no better than neutral, and in some cases it is tight.  On the  other hand, when it comes to producers the spigot is still turned on, but there is some diffidence by producers to borrow. If credit does play a role in the onset of the next economic downturn, it seems more likely that it will be caused by a tightening of credit to producers rather than to consumers.

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