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ING and NWM On SLOOS Implications

US OUTLOOK/OPINION
  • ING: “The Fed’s SLOOS shows banks have tightened lending standards further while households and businesses remain wary of taking on additional borrowing. Given how important credit flow is to the US economy it makes it all the more likely that the economy will continue to slow, helping to bring inflation back to target” […] “We see upwards of 150bp of rate cuts in 2024 versus the market pricing of around 90bp.”
  • NWM: “The tightening in standards has been broad-based among loan categories [and there most recently was] broad-based declines in demand for consumer and business loans. Today's survey lends support to our view that restrictive credit via tighter lending standards and falling loan demand will restrain capital and labor. We still call for a mild recession in mid-2024, with the unemployment rate reaching 4 1/2% or so by Q2(24)”.
  • NWM’s rule of thumb suggests the 50.8% [from the Jul report] and the 33.9% [from the latest report] of banks tightening lending standards on C&I loans to large and medium-sized firms could drag circa 1.5-2pts from both Q4 and Q1 GDP growth. “If anything, the drag on growth is likely larger than suggested by C&I standards alone, given the breadth of tightening across all loan categories.”
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