For the past two years the major issue as far as business recovery is concerned has been access to credit.
In 2008 it was the utter collapse of credit that propelled the recession and throughout the recovery period there has been a lack of available cash for business to expand – assuming that they wanted to borrow money in the first place. The financial caution has been evident throughout the corporate community.
The most pressing issue for many banks is the impact of the Dodd Frank legislation on their day to day operations. The nearly 900 page piece of legislation has given rise to over 500 new regulations involving over a dozen regulatory agencies. Many of these reforms have been long sought by the financial community and many address the issues that led to the meltdown in 2008. At the same time there are many new regulations that have been questioned by the bankers and have led to a much less fluid system of credit than had been in place previously.
Banks and commercial loans increased by $6.9 billion in the last week before February 1. That brings the total to about $1.3 trillion. The week before the gain was $2.3 billion. Jumbo certificates of deposit rose $200 million to about $1.513 trillion in the latest weekly data, after rising $4.1 billion the previous week.
Revolving home equity loans rose $800 million to $548.0 billion after falling $400 million the previous week. These are not the kind of numbers that dazzle the market but they are improvements over where the lending community has been for the past year.
Credit Managers Index (CMI) shows a glimmer of hope!
Another set of data that provides some encouragement is from the National Association for Credit Management. The last two months of the Credit Managers Index has shown gains in both the number of credit applications submitted as well as the number of credit applications accepted. This is generally a good sign as it suggests that the business community is starting to open up to the possibility of business expansion.
Courtesy Dr. Chris Kuehl, Armada Corporate Intelligence and Director of BIIA