Want to Know Where the Economy Is Headed? Look at These Banks
Smaller lenders’ reports on business-lending growth may be a crucial signal for investors
By
July 14, 2025 Want to Know Where the Economy Is Headed? Look at These Banks
Smaller lenders’ reports on business-lending growth may be a crucial signal for investors
By Telis Demos, The Wall Street Journal, July 14, 2025
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Perhaps more than ever, it is smaller banks whose fortunes more closely track activity in the real economy, especially for midsize, domestically focused businesses.
The tariff-induced volatility that can power trading desks in New York, London and Hong Kong is also what holds back business owners across the U.S. from making hiring or investment decisions. That dynamic can boost fees on Wall Street, but slow income growth at regional banks that make more of their money through traditional lending. .
You can see this most clearly in commercial-and-industrial loan activity, which has been anemic in recent years. There has been a pickup in such lending over the course of the second quarter. But only to about 3% year-over-year growth, according to weekly Federal Reserve data…
When it comes to signals about the real economy, not financial markets, small banks will speak with the loudest voice. [end quote]
Larger banks complete with private equity to buy corporate bonds in the market. These big boys aren’t interested in lending to local businesses.
Commercial and Industrial Loans have stagnated since interest rates began to rise in 2023.
The growth rate is slow but still positive. An inflection point to shrinkage would indicate a recession in local economies.
Wendy