We also know that there is a laundry list of problems out there in the world: slow-growing Europe is being overrun by millions fleeing the chaos in the Middle East; rogue nations either have The Bomb or will shortly; the Chinese economy has slowed from a 10% growth rate five years ago to just under 7% today; industrial commodity prices are down by a third from their 2011 highs; oil prices have plunged almost 60% since mid-2014, sending HY energy-related credit spreads to over 1000 bps and reducing the number of active drilling rigs in the U.S. by 63% from last year's highs; business investment is anemic, despite record-setting profits; the world's major central banks seem powerless to boost growth, despite years of trillions of quantitative easing and near-zero interest rates.
I could go on, but you get the point: there is absolutely no shortage of bad news and things to worry about. However, there is a real shortage of good things to cheer. What follows are some charts that highlight surprisingly strong things that are occurring in U.S. economy:
Bank lending to small and medium-sized businesses (aka Commercial & Industrial Loans) has been growing at double-digit rates for five years, and is up over 11% in the past 12 months. Bank Credit, now $11.5 trillion, has increased over 7% in the past 12 months. Lending growth towers over the 4% nominal GDP growth of recent years.
Household balance sheets are in great shape. Credit card delinquency rates have never been so low. Real per capita net worth is at record levels. Household financial obligations are at historically low levels relative to disposable income. Households' leverage position (liabilities as a percent of total assets) has dropped by almost one third since its peak in early 2009.
The commercial real estate market is on fire. Commercial real estate prices have been growing at double-digit rates for years, and they rose 11-12% in the 12 months ended last August.
Federal revenues have been rising at a 11.3% annualized rate for the past five years, and in the past 12 months they have increased at twice the rate of nominal GDP growth. Individual income tax receipts grew 10.5% in the past 12 months. Taxes don't lie, and they don't grow like this if the economy is sick. Soaring tax receipts at the very least say that there are a lot of things going right in the economy.
The purpose of this post is not to paint an optimistic picture of the current or future U.S. economy. My point here is simply to say that there is enough good stuff going on to at least rule out another recession. And that happens to be good news, considering how worried markets are today.