By Aaron Back
U.S. banks are sending signals that the country’s economic expansion is getting long in the tooth.
Being
a key transmission mechanism for savings, investment and spending, the
banking sector is worth watching as a barometer for the health of the
overall economy. Lately it has been acting as one would expect toward
the end of an expansion phase.
Most glaringly, after strong lending growth for several years, momentum clearly is slowing.
In its quarterly report on the sector, the Federal Deposit Insurance
Corp. found that total loans and leases by banks and other insured
institutions rose by just 3.7% from a year earlier at the end of June.
That is the third consecutive quarterly deceleration and is down from a
6.7% pace of growth a year ago.
In a statement, FDIC Chairman
Martin Gruenberg
explicitly linked the slowdown to the fact that the economy is
now in its ninth year of expansion. But it is more than just a symptom.
Slower lending growth means less fuel for business investment and
personal consumption, potentially weighing on economic performance.
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