The first quarter Phoenix Management “Lending Climate in America” Survey results show lender confidence in the U.S. economy continues to deteriorate.

The Q1/16 survey continues the recent trend of lenders increasing pessimism about the future. Lenders confidence on how they expect the U.S. economy to perform beyond the next six months has fallen 11 points from a grade point average of a 2.13 in the previous quarter to a 2.02 in Q1/16. Similarly, their GPA for the U.S. economy during the next six months has also decreased 11 points to a 2.00. Sixty-seven percent of lenders, compared to 50% the previous quarter, believe that unstable energy prices will have the strongest impact on the economy in the next six months.

Echoing these sentiments, expectations for commercial lending are at their lowest point in seven years, lenders report that the percentage of their customers who expect no growth in the next six to 12 months more than doubled to 27%, and the percentage of lenders anticipating a tightening of their loan structures increased from 12% in Q4 to 17% in Q1.

Countering these negative sentiments, lenders indicated a slight across-the-board uptick in their financial institution’s plan to reduce interest rates, and they showed a marked shift in their expectation to increase leverage multiples. Twenty-two percent of lenders indicated the > 3.5x range would be the highest EBITDA ratio they would consider, a seven percentage point increase from the prior quarter, and the percentage of respondents who would consider a debt to EBITDA ratio of 3.0-3.5x increased 12 percentage points to 37%.

“In the survey, 27% of lenders believe the economy will perform at a ‘D’ level in the next six to 12 months, which is 16 percentage points higher than the previous quarter,” says Michael Jacoby, senior managing director and shareholder of Phoenix. “It’s concerning to see that lenders continue to remain doubtful about the prospects for the U.S. economy.”