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Bank lending to small and medium-sized business is still accelerating. The six-month annualized rate of growth is now at 15.4%, a post-recession high. The 13.6% year over year growth of C&I Loans is also at a post-recession high. This is undeniably a sign of increasing optimism among both banks and businesses, and that in turn is a good sign that the economy is still growing.
Meanwhile, the annual growth in savings deposits at U.S. banks has been running at double-digit levels since April '09. Clearly, the demand for safe-haven cash remains very strong, even as the economic fundamentals continue to improve. I suspect that much of the increase in savings deposits in the past 9 months comes from Europe, since that is where legitimate concerns about the future of economic growth still reside. As confirmation of this, 2-year swap spreads in Europe are still elevated, while U.S. swap spreads are still in "normal" territory.
So these charts continue to reflect the disconnect between improving conditions in the U.S. and still-precarious conditions in Europe.
13 comments:
One thing puzzles me: the top chart shows an explosion of bank lending--and a skyrocket in 2009--right into the teeth of the worst part of the recession. When the recession is half over, then commercial bank loan volume start plummeting sharply.
Is the shading shifted?
Were businesses trying to "hold on" by burning through capital?
One would think that such an explosion of lending would have triggered a recovery. But it did not.
"So these continue to reflect the disconnect between improving conditions in the U.S. and still-precarious conditions in Europe."
Have you seen this? It's almost kind-of funny:
The Simple American Trade That's Doing Amazing Again Today
Today's data won't come in until Monday, but it looks like withholding tax receipts for the past 4-5 weeks will be running in the 5.5% to 6% range y-o-y. That would be the best showing of the year.
U.S. Savings deposits as % of GDP
is 39%...an all time high...previous
high was 4th qtr 1964 at 34.49%...at
the start of the last recession the
% was 27%
Scott,
Do you think we're in a new investing reality where machine traders will always knock the market back down when it reaches a new high so that small, long term investors like myself ought to just put their money in a CD and forget about it?
Bill: I honestly don't believe that "machine traders" are ruining the market. But if they manage to push the market down artificially, it just creates an opportunity to buy. Buy and hold is still likely to work over the long haul.
The case for equities is the long term perspective. One constantly must remember one's long term goals - what is one saving for, how many years in the future does one need the money. Retirement, college tuition expenses for children, a gift to a beneficiary? Equities don't make much sense for a less than three year time horizon - you must give the companies time to grow.
There will always be new trading techniques, new strategies, new fads, etc. And there will always be examples of investment firms like of "Long Term Capital Preservation" imploding or the computer mini-crash of 2010, etc. etc. They are just part of investing in equities for the long term.
Warren Buffet recently made the case for long term investing in equities in Forbes magazine - I believe that I posted the link.
Today there is 6.2 trillion in savings deposits getting .50% or lower....at the end of 2007 there was
3.8 trillion in savings deposits getting around 4.5%....lots of money
getting nothing....
Unknown...did you see the Gallup Job
creation index which came in today at 24...the highest level since June 24,
2008
@brodero - Yeah I noticed that..
BTW my statement above that withholding tax data looks to be running around 5.5%-6% for the April BLS reporting period was conservative. It's more like 7%. I put my analysis on Hale Stewart's blog:
Weekly Indicators: I give up, you figure it out edition
One other note: On Business Insider a couple of the writers figured out that commercial and industrial loan growth correlates more strongly with job creation than anything else, including initial claims.
However, my own analysis of auto sales since the beginning of last year is starting to look even stronger, though I'm not enough of a mathematician to figure out the correlation.
Hi Scott how are you,.. javier from argentina
Could this happen?
http://www.youtube.com/watch?v=t6SmRz3y4ps
Regards
Javier: anything "could" happen, but I don't see a reason to believe that a catastrophic scenario such as a total collapse of the dollar is something to worry about. If the end of the world as we know it is going to happen, there's not much you can do about it.
They are most rigid this times because recession and some businesses are not complying with the policy and so they get stricter. Bank lending criteria needs to be followed by these business sector for banks to gain trust again.
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