US bank lending posts two consecutive monthly falls for the first time in over 5 years
US bank lending numbers are doing too well right now. On Friday the Fed released the latest numbers and loans & leases in bank credits fell 0.9% annualised. The blame is being laid at the feet of Trump uncertainty and the possibility of further Fed hikes making borrowing more expensive.
Credit flow is hugely important for any economy, and strong lending in the right conditions can foster healthy growth. The problem is that with copious amounts of cheap money, and low rates, it's only going to get more expensive. Although the data has had a bad spin put on it, it's not all bad news when you take a wider look. Credit has grown strongly for the last few years as the US recovered, so some easing off is justified, as long as it doesn't start trending lower for a protracted period. Europe looks to be entering that same position as the lending numbers showed earlier today. There, company lending rose 2.3% y/y and household lending was at the highest in 8 years.
Lending is another area the Fed needs to nurse with rate hikes as suddenly increasing borrowing costs can have a detrimental effect. It's one of many fine lines they are going to have to walk when setting rates. If banks and firms are also waiting fro Trump to deliver then that could mean a renewed jump in lending if he delivers to expectations, or a further contraction if his plans disappoint. The central bank keyword of the moment is "uncertainty" and this is one subject it applies to.
