What Happens to Leading Index for US When Commercial & Industrial Loans Contract?
Commercial and Industrial (C&I) loan contraction signals bank credit retrenchment. What happens to growth, jobs, and investment when business credit shrinks?
How Leading Index for US Responds
Scenario Background
Commercial and Industrial (C&I) loans are bank lending to businesses for working capital, inventory, and investment. Year-over-year contraction in C&I loans signals that banks are reducing credit to the business sector, typically because banks are tightening standards, demand is falling, or borrowers are deleveraging.
Read full scenario analysis →Historical Context
C&I loans contracted year-over-year during 1991 (-5% trough), 2002-2004 (-8% trough, extended contraction), 2009-2010 (-20% trough, the deepest post-war contraction), and 2020-2021 (-15% trough, driven by PPP dynamics and COVID). Each contraction preceded or coincided with recession and substantial job losses. The 2009 contraction saw non-residential construction spending fall 25% and business equipment investment fall 20% as C&I credit evaporated. The 2020 contraction was partly technical (PPP ...
What to Watch For
- •DRTSCILM showing net tightening percentage above 40%
- •SBA 7(a) loan volumes declining year-over-year
- •NFIB Small Business Optimism Index below 90
- •Commercial and Industrial loan applications declining
- •Bank earnings showing loan-loss provision increases
Other Assets When Commercial & Industrial Loans Contract
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