Phoenix Management’s “Lending Climate in America” survey results reveal optimism in the U.S. economy with results for the near-term economy exceeding pre-pandemic predictions for the first time since the country shutdown due to COVID.
Since reaching an 11-year record low in Q2/20, confidence in the near-term economy (next six months) has steadily climbed quarter over quarter to a 2.79 weighted average GPA in Q2 2021. Additionally, lender confidence in the U.S. economy in the long-term increased (by seven percentage points) to 2.36 from the previous quarter’s results of 2.29.
Real GDP decreased 3.5% in 2020. When asked, given the current state of vaccine rollouts, pandemic-related restrictions (and their potential easing), and stimulus plans, what level of GDP growth is expected for 2021, 58% of lenders surveyed predict a 4% to 5% growth in 2021. 21% of lenders expect less than 2%, while 14% predict 6% to 7% growth. Seven percent of lenders surveyed predict a 2% to 3% GDP growth in 2021.
Phoenix’s Q2/21 “Lending Climate in America” survey asked lenders what macroeconomic headwind they believe could derail economic recovery. Fifty percent believe policy risk (such as interest rates or withdrawal of stimulus) is most likely to be the macroeconomic headwind that could derail economic recovery. Twenty-one percent of lenders believe either international supply chain issues or vaccine distribution or virus mutation are most likely to be the macroeconomic headwind that could derail economic recovery. Of the lenders surveyed, 8% of lenders say consumer caution as the U.S. reopens will most likely be the macroeconomic headwind that could derail economic recovery.
Lenders were also surveyed this quarter to determine whether they believe the U.S. will return to pre-COVID employment rates by the end of 2021. The vast majority of lenders, 71%, believe many Americans will remain disincentivized from entering the labor force due to the current COVID unemployment benefits. Twenty-nine percent of lenders say that with the roll-out of vaccines, the U.S. will reach similar pre-COVID unemployment rates by the end of 2021.
“Confidence in the near-term U.S. economy continues to improve as results exceed pre-pandemic predictions,” Michael Jacoby, senior managing director and shareholder of Phoenix, said. “While lenders seem to be confident about the U.S. economy, the factor deemed most likely to derail the U.S. economy is policy risk and the majority of lenders are concerned about how current COVID unemployment benefits could disincentivize Americans from entering the labor force.”
Full results of Phoenix’s “Lending Climate in America” Survey are available on the company’s website.
