Commercial and Industrial Lending Remains Distressed
A graph today from David Rosenberg, Chief Economist for Gluskin Sheff (Toronto), shows one of the severe headwinds the recovery is battling. C&I (commercial and industrial) lending remains at historically depressed levels. May of 2010 is at levels 16% below May, 2009, which, in turn, was about 10% below May, 2008.
Rosenberg points out the following:
One-quarter of bank credit available for businesses has totally vanished during this intense debt deleveraging cycle (and nobody, including the Fed, knows why this credit contraction is ongoing — see Small-Business Lending is Down, But Reasons Still Elude the Experts on page B3 of the NYT; although in the article, Mr. Dunkelberg is quoted as saying:
“Credit’s not the issue, customers are the issue” in reference to the view that with capex plans near a 35-year low, the demand for loans is unusually low.
The New York Times article referred to is by Sewell Chan and is available here.
The comparison of the current situation to the two immediately preceding recessions is seen with a different perspective in the following graph from the St. Louis Fed:
It is noteworthy that C&I loan activity grew more rapidly going in to the current recession and also fell more rapidly as the recession ended. There is also a hint that the C&I loan activity may be bottoming. If this is the case, this recession would also see an upturn in C&I loan activity sooner this time than for the last two prior downturns, which saw loan activity bottoming after a period of time over three years from the peak.