US corporate credit demand reviving as "animal spirits" return
Simon Ward
Post a Comment
US capital goods manufacturers are increasingly bullish about their domestic sales prospects, according to a report in today's Financial Times. This accords with the ISM's December semi-annual investment intentions survey, indicating that manufacturing firms planned a 15% increase in capital spending in 2011, the largest since 1998 – see first chart.
Labour demand typically follows investment. January's jobs gain was depressed by bad weather but business surveys suggest that private payrolls expansion should strengthen significantly – second chart. Online job advertisements surged in January, as noted in a post last week.
A return of corporate "animal spirits" is also evidenced by a recent revival in bank credit demand. Commercial and industrial loans are still down by 5% from a year ago but have risen since the autumn, with the Federal Reserve's latest senior lending officer survey pointing to a further pick-up – third chart.
Rising corporate credit needs are clashing with a widening federal deficit, contributing to upward pressure on bond yields, despite the Fed's QE2 programme. (The Congressional Budget Office projects a rise in the deficit to 9.8% of GDP in fiscal 2011 from 8.9% last year.) A resumption of C&I loan growth in 1994 coincided with a severe Treasury bear market – the final chart draws an ominous comparison with recent yield movements.
View Printer Friendly Version
Email Article to Friend
Reader Comments