US banks are finally opening their purse strings according to The Federal Reserve’s quarterly senior loan officer survey. Who’s getting loans? Large companies, people with decent credit applying for auto loans or credit cards and also people buying homes. There are a number of reasons for why the banks are feeling more confident: less competition from beleaguered European financial institutions; households, whose spending makes up 70 percent of the economy, have cut debt since the 2008-09 credit crisis to 1994 levels; and banks have increased liquidity and bolstered capital buffers.
In fact, we are now at a post-recession high in terms of lending by banks. Borrowing by consumers and businesses rose in the week ended July 25 to $7.1 trillion, (2.9 percent shy of its October 2008 peak) according to Federal Reserve data. New lending for autos jumped to $134.3 billion in the first four months of the year, up 56 percent from the same period in 2009, according to credit bureau Equifax Inc. (EFX)
One sector that’s benefited is the U.S. auto industry which is on pace for its best year since 2007. Light-vehicle deliveries rose 8.9 percent in July to 1.15 million, and first-half sales are up 15 percent, setting a pace for more than 14 million annual sales, according to researcher Autodata Corp. This has a big impact on the overall economy: autos and auto parts comprise 7 percent of U.S. manufacturing, according to the Fed.