If ever there was proof that 'hope' is not a strategy, it is the 2017 Q1 Fed Senior Loan Officer Survey. Despite soaring confidence, spiking optimism, and striking gains in financial assets, demand for loans (from credit cards to autos to residential and commercial) have all plunged in the last 3 months.
Loand Demand collapsed across all asset classes in 2017 Q1
As Goldman Sachs notes, The Fed's Senior Loan Officer Survey for 2017Q1 showed that lending standards on commercial and industrial loans were largely unchanged. Standards on commercial real estate loans continued to tighten, while demand for construction and multifamily residential loans declined. Demand for residential mortgages weakened, while standards were little changed.
1. According to the Fed’s Senior Loan Officer Survey for 2017Q1, credit standards on commercial and industrial (C&I) loans were mostly unchanged. Relative to the prior survey, the net percentage of banks reporting tighter standards on loans to large and medium sized firms edged down (+1.4pp, from +1.5pp) while standards on loans to small firms were balanced (0pp from -1.5pp). Fewer respondents reported weaker demand from large and medium sized firms (0pp from -5.9pp) and from small firms (+1.5pp from -1.5pp).
2. On balance, commercial and industrial (C&I) lending standards remained unchanged while standards on commercial real estate (CRE) loans continued to tighten. A higher net percentage of banks reported weaker demand for construction and land development as well as multifamily residential property loans, while demand for nonfarm residential properties was roughly unchanged.
3. Relative to the last survey, lending standards for residential mortgage loans were mostly unchanged. Banks additionally reported weaker demand for most categories of residential mortgages, particularly for subprime and government loans.
4. The net percentage of banks reporting increased willingness to make consumer installment loans declined (+3.1pp from +12.5pp). Demand for these loans softened as well, particularly for auto and credit card loans.
5. This survey asked additional questions on the outlook for lending in 2017. Banks anticipate easier standards on C&I and residential loans and tighter standards for CRE and auto loans. Asset quality on C&I and residential loans are expected to improve somewhat, while the quality of credit card and auto loans is expected to deteriorate somewhat.
Charting some of the details makes the pain a little easier to comprehend...
Credit Card loan demand crashed... and standards tightened to near 7-year highs...
And even more problematic for the American economy - given the "inventory bubble" - Auto loan demand has plunged and standards are tightening drastically.
And finally while 'hope' remains Trumphoric, loan officers' "willingness to lend" signals a very different picture ahead for Small Businesses...
While "optimism" for sales and business outlooks soars near record highs, bank willingness to lend has plunged to 7 year lows!!