Lending and Credit Growth Still Booming Throughout Developed Economies

Lending and Credit Growth Still Booming Throughout Developed Economies

Lending and credit growth has held steady throughout 2016 despite a challenging economic climate. London-based research group Capital Economics today analyzed the annual trends in the United States, Europe, the United Kingdom, and Japan, showing that household lending is growing faster now than at any point since the financial crisis in 2008.

The lending trend is most prominent in the United States, with 8% year-over-year growth becoming the norm over the past 18 months after being near-stagnant as recently as 2014. The story in Europe is fuzzier. Lending in Germany and France has been accelerating of late, whereas it continues to fall in Italy where many banks remain troubled.

household lending

Chart: Capital Economics

A study of 80 banks by American Banker earlier this month offered a granular look at the lending boom. In the second quarter, it found that more than half of the financial institutions in the analysis reported double-digit loan growth. Specifically, the report found that “core loans” were up 23% in JPMorgan Chase‘s consumer and community banking segment, consumer loans were up 15.5% at at SunTrust, and commercial and industrial loan originations spiked 109%, year-over-year, at Banc of California.

“Banks have continued to extend credit to firms at a steady pace,” said Michael Pearce, global economist at Capital Economics, in an investor note. “In the U.S., eurozone, Japan, and the UK, banks generally report that credit demand has remained fairly strong, consistent with robust investment growth.”

Pearce expects this to continue. He cites “exceptionally loose” monetary policy forecasts throughout the developed world as well as the Bank of England’s asset purchase program and quantitative easing by both the European Central Bank and the Bank of Japan.

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