# Commercial and Industrial Lending Declines The Federal Reserve reported a decrease in commercial and industrial lending by $2.1 billion to $2.75 trillion in the week ending July 12. This decline highlights the importance of this sector in driving economic activity.
Trend Analysis
Before the collapse of Silicon Valley Bank, C&I loans achieved a peak of $2.82 trillion in mid-March. Since then, the pace of lending has gradually slowed down.
Large Domestic Banks
Lending at large domestic banks saw a slight increase of $1.7 billion in the latest week, reaching $1.54 trillion. Throughout the year, lending at these banks has remained relatively stable. It was recorded at $1.55 trillion in the week of January 4.
Small Domestic Banks
Contrarily, lending at small domestic banks experienced a decrease of $1.5 billion, reaching $720 billion. Following the collapse of Silicon Valley Bank, small-bank lending suffered a significant decline but has since shown signs of recovery from its low of $706.9 billion in late March.
Impact on the U.S. Economic Outlook
The crisis triggered by Silicon Valley Bank’s collapse has contributed to uncertainty surrounding the future of the U.S. economy. Although former Fed Chair Ben Bernanke believes the situation has improved, he notes that bank lending has been slowing down and credit standards have become stricter. These factors are expected to continue impacting the economy into the next year.
Softening Demand for Cars
Tighter credit standards and significantly higher interest rates have already led to a softening demand for cars, according to Ian Shepherdson, chief economist at Pantheon Macroeconomics.
The Fed’s Monitoring Efforts
To assess the state of bank-lending standards, the Federal Reserve conducts quarterly surveys of bank executives.
Market Reaction
On Friday, stock market performance ended mixed, with the Dow Jones Industrial Average (DJIA) extending its winning streak to 10 days. During the week, the yield on the 10-year Treasury note (TMUBMUSD10Y) rose by 1.9 basis points.
