By New Deal democrat
There are a number of Doomer sites I typically read, among other reasons because a few of them do link to interesting data series that turn out to be useful. One such site is Wolf Street, where this morning I read the following:
C&I loans are a sign of what businesses of all sizes are doing – from the small company that is borrowing to buy a piece of equipment to the largest behemoth that is funding its inventories. These loans show whether companies in aggregate are expanding their investments or pulling in their horns.
This chart covers C&I loans going back to 1988, covering the last three recessions. The turning points are circled in red:
The turning point during the Financial Crisis was unique – a sudden deep collapse in credit, when the banking system began to seize, rather than a classic turning point that evolved over time, as the prior two turning points exemplified.
The timing of a turning point may not be perfectly aligned with the beginning of a recession, but it’s close.
That, my friends, just like the unemployment rate, is a leading indicator for downturns in addition to being a lagging one for upturns. Only 3 cycles, so caution is warranted. After rising during the energy-led shallow industrial recession, delinquencies are now going sideways.