The Fed’s Senior Loan Officer Survey shows credit is available to borrowers
Availability of credit, the lifeblood of the corporate sector, is another instrumental signpost leading into recessions. To track this indicator, we closely monitor the Fed’s quarterly Senior Loan Officer Survey for hints that the banking system might be tightening the availability of credit. While this survey doesn’t have as much history as we would generally prefer (it began in 1990), its theoretical underpinnings are solid, and it has given an accurate warning ahead of the past three recessions. It showed signs of stress in 2016. A technical recession did not occur, but we would describe this period as a mini-recession. The stress in the energy sector resulting from the collapse in oil prices from the third quarter of 2014 to the first quarter of 2016 caused an uptick in the default rate in several important sectors of the economy. Today, the loan officer survey shows that we begin 2019 with ample evidence that banks are willing and able to lend.
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