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The numbers: Commercial and industrial lending — a key driver of economic activity — fell by $2.1 billion to $2.75 trillion in the week ending July 12, the Federal Reserve said Friday.
C&I loans hit a peak of $2.82 trillion in mid-March, right before the collapse of Silicon Valley Bank, and the pace of lending has been slowing gradually ever since.
Key details: Lending at large domestic banks rose $1.7 billion in the latest week to $1.54 trillion. Large-bank lending has held fairly steady this year. It stood at $1.55 trillion in the week of Jan. 4.
Lending at small domestic banks fell $1.5 billion to $720 billion. Small-bank lending fell sharply after Silicon Valley Bank collapsed but has recovered somewhat from a low of $706.9 billion in late March.
Big picture: The bank woes caused by the collapse of Silicon Valley Bank in March have added to uncertainty about the U.S. economic outlook. Former Fed Chair Ben Bernanke said the crisis “seems to be better” but that bank lending has been slowing and credit standards are tighter. This should continue to slow the economy going into next year.
Already demand for cars is softening is the face of tighter credit standards and sharply higher interest rates, said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
The Fed tracks bank-lending standards by conducting quarterly surveys of bank executives.
Market reaction: Stocks finished mixed on Friday, although the Dow Jones Industrial Average
DJIA,
extending a winning streak to 10 days. The yield on the 10-year Treasury note
TMUBMUSD10Y,
rose 1.9 basis points this week.
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