Saturday 11 January 2020

Business loans slow to near recession levels

Per the Fed H8 weekly survey of bank lending, US Business loans to 1st Jan are flat since Feb/ March 2019. 

Flat YoY has always been associated with a recession, often coincident to them. 

I would say though that this cycle is very different and I dont rule out a rebound into Q2 as the Fed cuts from last year come through and manufacturing may start to rebound. 

But it does imply Dec/ Jan data will look recessionary as the Fed tries to unwind some of its year end liquidity injection and while the auto sector adjustment is 'done' in terms of inventory liquidation there is scope for inventory liquidation elsewhere:

The rise in continuing claims and slowdown in the work week suggest CEOs & CFOs are looking to run inventories down in Q1:

Continuing claims:

Average hours worked per week is near a cycle low:


The Fed is also reversing the year end liquidity pump. Having grown the Fed balance sheet from $3,760bn in late August by $414bn by year end, in the first week of Jan $24bn was run off:

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