5: Welcome to Charts That Count.

7: We often hear about the bifurcated US economy,

10: with an energised consumer and a more subdued

14: corporate or industrial sector.

17: But sometimes that distinction is

19: hard to see in the data, outside of sentiment surveys.

22: Here is another way to look at it.

25: This is a chart of growth in loans on the balance

29: sheet of US banks.

31:

33: The chart shows two different kinds of loans.

36: The yellow line here represents unsecured consumer loans.

43: The green line, on the other hand,

45: is loans to companies or commercial and industrial

49: loans.

51: You'll notice a couple of things in this chart.

55: First, you do see the overall slowdown

59: in the growth in the American economy,

61: as reflected in declining loan demand,

64: right around the end of 2018 and into 2019.

72: But the two kinds of loans on banks' balance sheets

75: reflect that slowdown in quite different ways.

79: In consumer loans or credit card loans,

81: there is a noticeable decline.

83: But in 2019, the decline has stabilised at around four

89: per cent growth, greater than the growth

92: in the overall economy, in fact.

94: US consumers are still confident enough

97: to put debt on their credit card.

99: And banks are confident enough in those consumers

102: to let them do that.

105: With corporate loans, on the other hand,

107: the decline has been more precipitous and deeper.

111: We see that now the rate of growth

115: of loans to corporations on bank balance sheets in America

119: is practically zero.

122: Now it may be that the lack of growth

127: in banks' corporate lending reflects

130: more than just the economy.

131: It may be that companies are going other places

135: to borrow money, such as the bond market,

137: rather than going to banks.

138: It may also mean that banks are selling on some loans

142: that they originate.

143: However, this trend is so dramatic

146: that demand for loans for corporations

149: has to be part of the story.

151: And here is a question.

154: In recent quarters, as this chart reflects,

157: earnings growth at banks has been

159: driven by consumer banking, which is still growing

163: at that reasonable rate.

165: There has been no growth drive or less growth

168: driven on the corporate side.

170: If banks are making up for the lack of corporate activity

174: by extending risky loans to consumers,

177: the fact is, we may not find that out for a couple of years.

181: The economy is strong.

183: Unemployment is low.

185: And if consumers are taking risky loans,

187: it's going to take a while to figure that out.