Credit Ponderings

Daily Thoughts 14 Mar 2025

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We have been trying to establish a direction for the U.S. economy for three months. At the end of February, I noted that:

What can we expect, then? Declining economic momentum, downward-drifting stock markets (most powerfully after mid-March), growing banking fragility feeding into re-tightening of lending standards, recession and a banking crisis. Or, maybe I am wrong and the U.S. economy turns nicely back into growth. I just don’t think I am.

Timing is what bugs me. Yeah the outlook is not especially good, but when does the downturn begin? The nowcast of the Federal Reserve Bank of Atlanta (continues) to think we’re in it already, but I (continue) to have my doubts. The next update on the nowcast will be published on Monday.

One of the measures I check periodically are bank loans. This is for the simple reason that lending (borrowing) essentially precedes all investments (with the exception of a small share of corporations and households able to finance their major investment projects from their cash flows). Let’s now take a quick look, what they tell us.