Delinquency rates on commercial and industrial loans spiked higher in the first quarter of 2016 and, based on forward-looking data, are poised to increase well into next year.
Data for US delinquency rates on commercial and industrial loans is available in Bloomberg and on the FRED website. We have shown this data in blue next to the percentage of banks reporting tightening standards on these same loans to large- and medium-sized firms in orange.
Pulling this data up on Bloomberg or FRED would not give the same chart. Instead, the two would be slightly out of phase, with longer-term bank tightening trends rising and falling before delinquencies do the same.
When shifted forward by four quarters, as we have done in the graph above, a very high correlation is clearly seen between the two with bank tightening acting as a leading indicator for delinquencies. If this longer-term relationship persists, it suggests the trend for delinquencies on commercial and industrial loans is set to increase well into 2017.
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