Credit Growth About To Surge

One of my favorite data series is the Fed senior loan officer opinion survey. Hidden amongst the various questions and series of the report are some really useful signals and insights on both the US economy and financial markets. Today we look specifically at commercial and industrial lending standards (the red line in the chart), and most importantly, how it seems to line up with commercial and industrial loan growth.

It makes economic sense that the two would move in line with each other e.g. looser lending standards are likely to be followed by increased uptake of loans… also, loan growth is likely to be softer then the economy is softening and spurring credit officers to tighten up standards. So with lending standards easing further in the latest survey results, the outlook is for a surge in credit growth. This interestingly enough lines up with our scenario of a US investment boom.