One threat to the U.S. economy that does not get a lot of attention is the recent slowdown in commercial lending, which could act as a drag to future growth. In March, commercial loans rose just 2.5% from a year ago, down from the 7% average monthly growth rate of the last three years. So far this year, Corporate Bond issuance is down 14% from last year’s levels.
While companies may be generating enough cash flow internally to fund investment (given the healthy economy and recent tax cuts), the slowdown in lending may also be due to the already high levels of debt. Net debt at investment grade corporations is now 1.8x EBITDA, the highest level since 2002.
Source: The New York Times