Commercial Loan Growth Shows Ongoing Strength
A few weeks ago, I posted about commercial bank loans being at a record high of $760 billion in early January, based on weekly Federal Reserve banking data for large commercial banks. The updated chart above (click to enlarge) reflects a few more weeks of banking data, and this time shows the percent change from a year ago. Not only is commercial lending at an all-time high based on volume, but also the year-to-year growth rate has been phenomenal: double-digit growth in commercial bank loans for almost 6 months now, and close to 20% growth for the last 4 months, stronger growth in commercial lending than at any time in at least 20 years.
Listening to media reports on the U.S. banking system and credit markets, one gets the idea that commercial lending and credit have dried up, and thousands of banks and companies are teetering on the edge of insolvency (e.g., see Paul Krugman's blog post "Credit Crunch"). Yet the reality is that commercial lending is at an all-time historical high, and growing at the fastest rate in recent history.
This suggests that thousands of companies are applying for, and being granted, commercial loans to finance business investment and expansion. And the growth in commercial lending is stronger than ever before. Not exactly an ingredient for a recession. Notice on the graph above the significant declines in commercial lending that accompanied the recessions in 1990-1991 and 2001 - it would be difficult to suggest that we have entered a recession in January 2008 with such strong growth in commercial lending.