Commercial and Industrial Loans Decline Amid Economic Concerns

The Federal Reserve revealed that commercial and industrial loans, which play a crucial role in driving the economy, experienced a significant decrease of $6.2 billion, bringing the total to $2.75 trillion for the week ending August 9. This downward trend in lending has persisted for the past four months, starting from the collapse of Silicon Valley Bank in mid-March.

Key Numbers

In the latest week, lending by large banks witnessed a decline of $6.3 billion, reaching $1.54 trillion. By comparison, it stood at $1.55 trillion in mid-March. Conversely, small banks experienced an increase in lending by $1.6 billion, totaling $716.3 billion. This represents a recovery from the $743 billion recorded in mid-March.

Concerns Ahead

Federal Reserve officials expressed worry about the potential impact of tighter credit conditions on households and businesses since the Silicon Valley Bank collapse. Although the extent of these effects remains uncertain, the Fed is concerned that banks might reduce lending and tighten standards to such an extent that it triggers a credit crunch in the broader economy.

Market Response

The S&P 500 Index (SPX) endured its third consecutive weekly loss as bond yields climbed higher due to the Federal Reserve's persisting concerns over inflation. The 10-year yield (BX:TMUBMUSD10Y) continued its upward trajectory for the fifth consecutive week, reaching 4.251% at the end of the week.