FinalCut: Phoenix Survey – Lenders Predict Trouble Ahead
ABF Journal illustrator, Jerry Gonzalez, offers a chilling interpretation of a top-ranked abfjournal.com news story.
Results of the Q/3 Phoenix Management “Lending Climate in America” Survey signal that lenders’ expectations regarding major economic and lending indicators declined as compared with the previous quarter.
The overall index for all domestic lending segments decreased by 51 percentage points in comparison to last quarter’s survey. Respondents indicated that, on average for all domestic lending categories, only 22% expect increased loan demand (versus 56% in the prior quarter).
Seventeen percent of lenders in Q3/11 anticipate overall domestic lending to decline, compared to 0% in the previous quarter. All three major domestic commercial lending categories including corporate, middle-market and small business experienced significant pull back in sentiment in Q3/11 versus the prior quarter.
Responses to other questions were just as pessimistic. Forty-four percent of respondents’ customers anticipate making new capital investments in the next six months (down 25 percentage points from the previous survey). Forty percent also anticipate their customers to introduce new products or services in the next six months; six percentage points lower than in Q2/11. Thirty-five percent responded their customers are planning on making an acquisition; lower by 19 percentage points from the previous quarter.
Lenders’ expectations for economic growth declined for the next six months compared to the previous survey. As a result of the current economic outlook, lenders economic growth expectations fell by nearly a half letter grade to D+ levels compared to the previous survey. There has not been this low of a grade seen since Q3 of last year. This drop off may imply that there may be a double dip. Lenders expectations of the three major macroeconomic indicators (loan losses, bankruptcies and unemployment) all weakened versus the previous quarter.
“I was not expecting such negative indications from lenders this quarter,” said Michael Jacoby, Phoenix senior managing director and shareholder. “While I anticipated seeing an overall decline in domestic lending, it was a surprise to see that it dropped by fifty-one percentage points in comparison to last quarter’s survey. I can’t recall seeing such a large decline.”