– by a New Deal Democrat
While we’re still in the doldrums on the monthly side, there was a significant update on Monday to one long-running leading indicator that’s only reported quarterly: The Senior Loan Officer Survey.
This study has an excellent history of over 30 years of telling us about credit conditions. Loosening credit and increasing demand for credit means expansion ahead. The tightening of credit and the reduction in demand for credit occurred only shortly before, during, and shortly after recessions.
In the case of Q4 2022, the data speaks for itself.
Here is the search for commercial loans from large, medium and small businesses:
With the exception of one quarter in 1994, a decline in demand of this magnitude has only occurred during the 3 recessions since then.
Here is the net percentage of banks tightening credit for loans to large, medium and small businesses. Note that in this case, a higher number means more tightening, so it’s bad:
The only time conditions tightened this much was before or during the last 4 recessions since 1990.
In the fourth quarter, banks tightened lending and companies stopped asking for loans. It’s a recession, period.