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Materially Slowed SLOOS

Jeffrey Snider profile picture
Jeffrey Snider


  • More US bank respondents reported to the Federal Reserve that they are seeing weaker demand for Commercial & Industrial Loans than at any time since the end of the Great "Recession."
  • In some ways, recent data poses a unique challenge; SLOOS says demand never really rebounded after Euro$ #3 but C&I lending growth picked up starting early last year. Tax reform difference? Most likely.
  • Either way, at some point these two series are almost certain to converge.

More US bank respondents reported to the Federal Reserve that they are seeing weaker demand for Commercial & Industrial Loans than at any time since the end of the Great "Recession." The Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) asks respondents to gauge certain factors with regard to various forms of lending.

In terms of new debt to commercial and industrial customers for commercial and industrial purposes, the survey conducted last month reports the net percentage of domestic financial firms indicating strong demand for these kinds of loans was -16.9%. Nearly seventeen percentage points more on the weak side than stronger. That's more downside skew than in Q4 2011, the most since the first quarter of 2010.

It isn't a huge change, the downward bias mostly intact since the eruption of Euro$ #3 ("overseas turmoil", to Yellen's Fed) in Q3 2014. However, there is a notable shift toward reporting weaker demand starting in Q4 2018 - the same October to December window suggested by both market conditions as well as global economic evidence.

This hasn't yet translated into lower lending volumes and outstanding debt. Yet. Typically, banks have reported reduced demand while still booking more loans. There is a definite lag to C&I lending.

In the dot-com recession of 2001, C&I loan assets didn't actually decline until the month before the official (NBER) start date of that particular business cycle trough. The SLOOS survey, on the other hand, had suggested seriously slowing demand right after Q1 2000 (dot-com peak).

During the Great "Recession", banks continued lending heavily in commercial and industrial purposes all the way until the very heart of the global panic itself. It wasn't until October 2008 that loan assets in the space peaked, though SLOOS indicated a turn toward weaker demand seven months earlier around Bear Stearns.

This article was written by

Jeffrey Snider profile picture
As Head of Global Investment Research for Alhambra Investment Partners, Jeff spearheads the investment research efforts while providing close contact to Alhambra’s client base. Jeff joined Atlantic Capital Management, Inc., in Buffalo, NY, as an intern while completing studies at Canisius College. After graduating in 1996 with a Bachelor’s degree in Finance, Jeff took over the operations of that firm while adding to the portfolio management and stock research process. In 2000, Jeff moved to West Palm Beach to join Tom Nolan with Atlantic Capital Management of Florida, Inc. During the early part of the 2000′s he began to develop the research capability that ACM is known for. As part of the portfolio management team, Jeff was an integral part in growing ACM and building the comprehensive research/management services, and then turning that investment research into outstanding investment performance. As part of that research effort, Jeff authored and published numerous in-depth investment reports that ran contrary to established opinion. In the nearly year and a half run-up to the panic in 2008, Jeff analyzed and reported on the deteriorating state of the economy and markets. In early 2009, while conventional wisdom focused on near-perpetual gloom, his next series of reports provided insight into the formative ending process of the economic contraction and a comprehensive review of factors that were leading to the market’s resurrection. In 2012, after the merger between ACM and Alhambra Investment Partners, Jeff came on board Alhambra as Head of Global Investment Research. Currently, Jeff is published nationally at RealClearMarkets, ZeroHedge, Minyanville and Yahoo!Finance. Jeff holds a FINRA Series 65 Investment Advisor License.

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