Commercial and Industrial Loan Growth Accelerating

 |  Includes: DIA, KBE, QQQ, SPY, XLF
by: Calafia Beach Pundit

Both of these charts (click on each to enlarge) show Commercial & Industrial Loans, which are a good measure of bank lending to small and medium-sized businesses. (Latest datapoint is June 1st.) The top chart gives some historical perspective, while the bottom chart plots weekly values since last September, which marked the point when loans began to grow after falling for the previous two years.

Over the past three months, C&I Loans have grown at a 12.2% annualized rate, and they have grown at a 10.1% annualized rate over the past six months. Each of those growth rates is almost twice the rate recorded at the end of March (6.8% and 5.8%), so it is clear that lending activity is really picking up.

This is good news not because loans are needed to fuel growth, but because it shows that a) banks are more willing to lend and b) businesses are more willing to borrow. That adds up to a big increase in confidence, and that is what it takes for new investment, which in turn is what it takes for new jobs.

This news is a welcome change to the seemingly overwhelming supply of bad news and pessimism which prevail these days. The economy is of course still laboring under the weight of many structural problems (e.g., questionable monetary policy, bloated government spending, crushing regulatory burdens, and the threat of higher tax burdens), but news such as this is important to stress, because it shows the despite all the problems, economic life goes on and there are still many people willing to pursue new business and profit opportunities. This is key to understanding why the U.S. economy is still one of the world's most dynamic. Imagine if those headwinds were to diminish under a new administration with a laser focus on cutting spending, reducing regulatory burdens, cutting taxes ....