Manufacturing gets hit when credit crunches take hold
We’ve previously explored worries about a credit crunch in the US. This week, we turn to big business – showing the historic link between tightening loan conditions and manufacturing output.
This chart compares the Federal Reserve’s Senior Loan Officer Opinion Survey (SLOOS) with the Institute for Supply Management’s purchasing managers index (PMI), the well-known survey of manufacturing executives.
PMI readings below 50 indicate economic activity is contracting. For the SLOOS series, which tracks Commercial & Industrial (C&I) loans, the inverted axis shows the net percentage of bankers reporting tightening credit standards. (I.e., a negative reading is good news, as it means more loan officers are reporting that standards are easing.)
The simultaneous troughs in previous recessions are clearly visible – as is the tandem move today; PMI has shown contraction for six months.