May 17, 2023 | Outlook Sours on Tight Credit and Fewer Loans

The May 2023 Dallas Fed bank credit survey results were just released, and the data is recessionary. It’s not just consumer credit that’s in decline. Commercial and industrial loans have contracted at a 14% annualized pace since mid-March and loans to commercial real estate at a -4% annualized rate. See Banking outlook continues to deteriorate amid further credit tightening, declines in loan demand.

Loan demand declined for the sixth period in a row amid further loan pricing increases and worsening general business activity. Overall, loan volumes continued to decline as well, though at a decelerated pace. Residential real estate loan volumes stabilized after falling for several months, and consumer loan volume declines slowed notably. Significant volume declines continue to be seen in commercial and industrial and commercial real estate lending. Credit conditions tightened further; 48 percent of bankers said they tightened credit standards and terms over the past six weeks, the highest share since the survey began in 2017. Loan nonperformance continued to increase slightly. The banking outlook continues to deteriorate, with contacts expecting a further contraction in business activity and loan demand and an increase in nonperforming loans over the next six months.

Danielle Park May 17th, 2023

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