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Strategies & Market Trends : Joe Stocks Trader Talk
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To: Joe Stocks who started this subject2/20/2002 9:05:55 PM
From: Joe Stocks   of 787
 
Commercial/Industrial Loans.
ECONOMY TALK: For the fourth time in five weeks, commercial & industrial loans increased last week, rising a whopping $8.2 billion to $1.019.7 trillion in the week ended February 6th. The increases follow a string of weakness wherein C&I loans fell by nearly 10% from the peak of $1.122 trillion set in the week ended February 28th, 2001. The weakness was largely the result of two factors. First, many companies shifted their borrowing to the credit markets where new issuance of debt securities reached a record last year. Second, companies that use C&I loans to fund the accumulation of inventories reduced their demand for funding when they liquidated their inventories. Businesses have been reducing inventories at a rapid clip, with inventories falling at the fastest pace ever last quarter. A continued increase in C&I loans would be consistent with the notion that the recent extraordinary pace of inventory liquidation has ended and that a rebound in industrial production is underway. C&I loans will likely firm in advance of an economic rebound and should be watched for signs of expansion in bank credit. Although C&I loans have declined recently, bank credit has been increasing, albeit more slowly of late. But nearly all of that increase is the result of an increase in bank holdings of securities. In fact, half of the expansion in bank credit is the result of an increase in bank holdings of Treasuries. The composition of the expansion of bank credit is therefore less desirable in terms of implications for the economy. C&I loans have fallen by roughly $45 billion since the end of August and are down 8.4% from year ago levels
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