Bank Loan Growth: Insight into US Economic Resilience

What is the data on loan growth at banks showing us about the health of the consumer? Consumer credit has been growing more slowly in the last couple of months in the United States and a lot of that is we had a big bounce back of consumer credit growth in 2022 and 2023. Consumers have paid down a lot of debt using stimulus funds during the lockdown period of pandemic and so there was some normalization there. A lot of low and moderate income consumers also were using credit to make ends meet when the cost of living surged in 2022. And so that use of credit has slowed quite a bit in the last couple of months. Now we're seeing consumer spending driven more by income growth and by job growth than by borrowing. So looks like consumer finances are are more in a steady state and less imported by further credit growth. What are delinquencies telling you in terms of how sustainable these high interest rates are for consumers? the US economy right now, again, growth is holding up all right, but the low and moderate income consumers are struggling in the face of the high cost of living and rent costs. You see that showing up in higher delinquency rates for credit cards. You see that showing up in consumer surveys that show more people are moving in with family, moving in with roommates. The one survey described as people sharing tables, sharing roofs to cope with the cost of living. And so that is an ongoing trend in the US that's going to keep economic growth, while positive, still slower than we saw in 2023 over the rest of this. Do you expect that the markets are going to continue to trade this way? Kristen mentioned the record closes for the SDP and the NASDAQ. Given this interest rate environment, I think high interest rates continue to be a a headwind for interest sensitive parts of the economy. So I think commercial real estate, we've seen a big drop in multifamily housing starts over the course of this year. But I I think parts of the economy that are fueled by affluent consumers are going to continue to see economic growth. And at the same time, we see, you know, continued rapid adoption of AI technologies in the business sector, especially in the technology industry where it seems like there's a lot of applications today with marketing services as well as software development. And so I think that's going to be a continued driver of the economic growth that will show up in the financial markets in the rest of the second-half of the year. Bill, I believe you're joining us from Dallas and we did a story recently that there is some interest in building a Texas Stock Exchange. What could that potentially mean for the Texas economy? You know, it's it's really exciting to see headlines about that headlines like that for Dallas. The economy here, I will say is just there's this secular growth trend in Texas of people relocating from high cost of living areas to this part of the country. There's also a lot of entrepreneurialism here. And so I think if this Stock Exchange in Texas is successful, I think that would add to this virtuous cycle of economic growth in this part of the country. Certainly economic growth, GDP growth, job growth has been much faster in Texas. So I think it's more good news there. How could they lure existing public companies from here or the NASDAQ? Or do you think this would be more focused on future IPOs? You know, my, my guess is that it'll probably be more future IPOs. Hard to get companies to relocate once they're already listed in one, one domicile. You know, I, I think the, the broader trend is just that there's a, a growing financial services industry in Texas and this is going to be another part of that ecosystem. All right. Bill Adams, SVP and chief economist for Comerica Bank, joining us ahead of that Fed decision. Bill, thank you.