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US loan growth is not painting a pretty picture for the US economy

Written by Mike Riddell

One of the current big debates in global financial markets is whether investors should believe ‘hard’ rather than ‘soft’ data, where the usually reliable business and consumer surveys have been suggesting strengthening in global growth momentum for some time now, while the economic data that feeds through into the Gross Domestic Product (GDP) numbers has not been following as would normally be expected.

The Atlanta Federal Reserve’s GDPNow Forecast, which we have previously discussed here, is suggesting US GDP in Q1 is set to slump to an annualised growth rate of just +0.6%, which if correct would be the slowest US quarterly growth rate in three years.

An area of the US economy that is performing surprisingly poorly is loan growth. The post-Trump surge in business and consumer confidence, combined with a significant (initial) steepening in yield curves and the potential for banking sector deregulation, has not translated into greater demand for or supply of credit. In fact, quite the opposite.

The chart below plots commercial and industrial loan growth, loans and leases in bank credit, auto loans and real estate loan growth. Real estate loan growth is not as bad, but the trend is the same, and the limited data history suggests that the series may lag. Total lending growth rates are now in line with periods when we have previously seen negative US GDP growth (shaded areas), which is potentially indicative of higher US rates starting to bite.

Investing involves risk. The value of an investment and the income from it may fall as well as rise and investors might not get back the full amount invested.

Past performance is not a reliable indicator of future results. If the currency in which the past performance is displayed differs from the currency of the country in which the investor resides, then the investor should be aware that due to the exchange rate fluctuations the performance shown may be higher or lower if converted into the investor’s local currency. The views and opinions expressed herein, which are subject to change without notice, are those of the issuer companies at the time of publication. The data used is derived from various sources, and assumed to be correct and reliable, but it has not been independently verified; its accuracy or completeness is not guaranteed and no liability is assumed for any direct or consequential losses arising from its use, unless caused by gross negligence or wilful misconduct. The conditions of any underlying offer or contract that may have been, or will be, made or concluded, shall prevail.

This is a marketing communication issued by Allianz Global Investors GmbH,, an investment company with limited liability, incorporated in Germany, with its registered office at Bockenheimer Landstrasse 42-44, 60323 Frankfurt/M, registered with the local court Frankfurt/M under HRB 9340, authorised by Bundesanstalt für Finanzdienstleistungsaufsicht ( This communication has not been prepared in accordance with legal requirements designed to ensure the impartiality of investment (strategy) recommendations and is not subject to any prohibition on dealing before publication of such recommendations. The information contained herein is confidential. The duplication, publication, or transmission of the contents, irrespective of the form, is not permitted.



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