Economic Update: Commercial and Industrial Loans Hold Steady

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The Federal Reserve reported that commercial and industrial (C&I) loans, a crucial driver of the economy, remained relatively stable in the week ending July 5. According to the central bank, loans increased by $200 million, reaching $2.754 trillion.

In recent months, bank lending has shown a gradual deceleration, declining for three consecutive months. Prior to the collapse of Silicon Valley Bank, C&I loans had reached their peak at $2.82 trillion in mid-March.

Encouraging Bank Deposits

In the same week, total bank deposits saw a slight increase of $24.9 million, totaling $17.367 trillion. Despite a slow decrease in deposits, they had previously peaked at $18.21 billion in mid-April.

Analyzing the Bigger Picture

Economists have been closely monitoring the data following the collapse of Silicon Valley Bank in March. There have been concerns about a potential credit crunch, as banks with weakened balance sheets have navigated the Federal Reserve’s rapid interest rate hikes since March 2022.

San Francisco Fed President Mary Daly commented on the matter, stating that she had not observed extraordinary credit tightening.

“While it may take some time for the full effects to manifest, current research indicates that we may not see conclusive evidence of significant credit tightening until the fall. Thus, it is premature to make definitive statements about the extent of credit tightening and its impact on the economy,” Daly explained.

Market Outlook

On Friday, stocks made gains as the DJIA and SPX indexes finished higher. Meanwhile, the yield on the 10-year Treasury note(TMUBMUSD10Y) rose to 3.83%.

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