The October 2023 Senior Loan Officer Opinion Survey on Bank Lending Practices
(…) Regarding loans to businesses, survey respondents, on balance, reported tighter standards and weaker demand for commercial and industrial (C&I) loans to firms of all sizes over the third quarter.
Furthermore, banks reported tighter standards and weaker demand for all commercial real estate (CRE) loan categories
.For loans to households, banks reported that lending standards tightened across all categories of residential real estate (RRE) loans other than government residential mortgages, for which standards remained basically unchanged. Meanwhile, demand weakened for all RRE loan categories.
In addition, banks reported tighter standards and weaker demand for home equity lines of credit (HELOCs). Moreover, for credit card, auto, and other consumer loans, standards reportedly tightened, and demand weakened on balance. (…)
Banks most frequently cited a less favorable or more uncertain economic outlook; reduced tolerance for risk; deterioration in the credit quality of loans and collateral values; and concerns about funding costs as important reasons for tightening lending standards over the third quarter. (…)
Among all the charts in the SLOOS report, this is the critical one: consumers demand for all types of loans is falling.
Regarding demand for consumer loans, significant net shares of banks reported weaker demand for auto and other consumer loans, while a modest net share of banks reported weaker demand for credit card loans.
The holiday spending outlook is sluggish across thousands of retailers: CNBC Supply Chain Survey
As holiday shopping season begins, lack of big orders from retailers is the rule amid fears that consumer spending will be weak, according to a new CNBC Supply Chain Survey.
At C.H. Robinson, which serves 7,500 retailers, customers are generally being cautious, said Noah Hoffman, vice president for North American Surface Transportation, with inflation still an issue and ongoing uncertainty about the U.S. economy and risk of recession.
“The largest retailers are past working through their excess inventories, but careful not to over-order,” Hoffman said, while some of the small- to medium-sized retailers are still destocking.
The national inventory-to-sales ratio, which on the surface appears to have returned to a pre-pandemic level, is skewed by the largest retailers, he said, adding that, “further upstream in the retail supply chain, many wholesalers are also still carrying excess inventory.”
C.H. Robinson’s economics team believes that the economy is approaching an inflection point in consumer spending as Americans deplete savings they built up from pandemic stimulus.
“We’re already seeing this emerge in some leading indicators like loan and credit-card delinquencies,” Hoffman said.
During earnings, major U.S. banks have presented a picture of the consumer that is more resilient. “Where am I seeing softness in [consumer] credit?” said JPMorgan chief financial officer Jeremy Barnum, repeating an analyst’s question on the bank’s earnings call. “I think the answer to that is actually nowhere.”
But the recent message from retailers and shippers has been more pessimistic. At the CNBC Evolve Global Summit last Thursday, Target CEO Brian Cornell said the company is doubling down on its cautious outlook for the holiday season. At the same event, FedEx CEO Raj Subramaniam said that while the destocking period has ended for retailers, restocking has not been widespread.
A majority of logistics firms (67%) say that products being moved into stores this holiday season are more promotional, lower-cost items into the store. An even larger majority (83%) indicated that they are not moving more higher-priced items. (…)
“Retailers are finding that the items they rely on to bring people into the store and boost sales are costing them more,” Hoffman said. “That’s limiting how much they can discount so we’re working with them to find savings elsewhere in their supply chains.” (…)
Starting in November, logistics companies start to receive orders from shippers ahead of Lunar New Year. Traditionally, manufacturing plants in China shut down for around a month, so shippers bring products in ahead of time to avoid delays. The survey finds that there is a similarly muted outlook for orders surrounding Lunar New Year, which falls on February 10, with a majority of respondents (67%) not seeing an order increase. (…)
The survey finds respondents split in their outlook for 2024. In the first half of 2024, 34% expect freight volumes to be down either 5% or 10%; 33% of participants said it would be unchanged; and an equal percentage expect an increase of 5%. (…)
Trucking companies get paid per load, and the low expectations for orders imply potentially lower revenue this holiday season. Logistics executives were split on LTL (less-than-truckload) freight rates for the first quarter, with half looking for a 5% bump and the other half expecting rates to be unchanged to down as much as 15%.
The majority believe rates for full truck loads will be unchanged or down, while 33% expect prices to be up marginally at 5%. (…)
This chart confirms wholesalers’ excess inventories. Since the end of 2019, both merchant categories recorded similar growth in sales.
The New Headache for Bosses: Workers Aren’t Quitting Just last year, companies were struggling to keep staff. Now, they say not enough people are leaving their jobs.
(…) Turnover has declined so steeply at some large employers that companies now find themselves over budget on certain teams, requiring leaders to weigh whether to postpone projects or to cut additional staff as the end of year approaches. Other bosses worry about how to keep star employees engaged when there are far fewer vacant positions internally, making it harder to move people into new roles.
Companies such as Bank of America and drugmaker Ferring Pharmaceuticals said they have seen fewer employees leave their jobs this year. In some cases, executives said, turnover is returning to prepandemic levels following years of upheaval in the labor market.
“The attrition level is going down, that’s for sure,” said Denis Machuel, chief executive of global staffing firm Adecco Group, which works with large employers. “People feel it’s probably a bit cold outside with the macroeconomics not being so good. And with this last-in, first-out typical scheme, they’re more likely to stay in their current role.” (…)
Morgan Stanley had layoffs in recent months in part because of low attrition within the 80,000-person Wall Street firm, CEO James Gorman said on a call with investors in mid-October.
“Really high performers are in demand across the Street, but we’ve actually had the opposite issue,” Gorman said. “We’ve had very low attrition, which is why we did some of the expense initiatives.”
Wells Fargo’s Chief Financial Officer Mike Santomassimo told investors this summer that attrition has been slower than expected at the company and that the bank planned to record higher severance expenses to reduce its head count. He reiterated the message in mid-October, telling investors that the company believed it still had more jobs to cut, as attrition has remained low, which will likely result in additional severance costs next year. (…)
Employers try to accurately predict how many staffers will quit in a given year to help set budgets for teams and establish hiring plans. At the software provider ServiceNow, the company uses a machine-learning model to anticipate the number of employees it expects will step down each quarter. Voluntary turnover this year has fallen below levels forecast by those models, said Sarah Tilley, senior vice president of global talent. She didn’t cite specific figures, but attrition among top-performing employees in 2023 is less than half of what it was in 2022. (…)
In surveys of workers, many show a newfound commitment to their current employers. This year, 73% of workers said they planned to stay at their jobs, up from 61% last year, according to a survey released in October by Adecco. (…)
Staying put is a sign of cautiousness.
Taking multiple jobs is a sign of financial stress. The number of multiple jobholders has surged recently. As a percent of employeds, it is back to pre-pandemic levels and the highest since the GFC. Less buffer.
- The Fed’s Neel Kashkari told the WSJ that overtightening monetary policy is preferable to doing too little and added that he’s concerned that inflation could tick up again. He later told Fox it’s “too soon” to declare victory over inflation, adding that three months of promising numbers on inflation isn’t enough.
China’s Import Surprise Offers Hope as Recovery Risks Linger Imports increased 3%, bucking forecast for a decline
but exports’ worse-than-expected drop adds to mixed signals
Imports rose 3% from a year earlier last month, the first gain in eight months and bucking the consensus forecast for a drop. Overseas shipments dropped 6.4%, worse than expectations. The resulting trade surplus was $56.5 billion. (…)
Import growth suggests domestic demand may be recovering, but the decline in exports was a big disappointment for a period that should have been more favorable: This October compared to a month in 2022 when the pandemic and controls to contain it disrupted logistics and production. (…)
For China, however, exports to the US declined 8.2% in the first 10 months from a year ago in dollar terms, while that to the European Union dropped 12.6%, according to customs data. (…)
The volume of China’s crude oil imports climbed 14.4% in the first 10 months of the year from a year ago, while that of coal surged 66.8%, according to customs data.
Overseas shipments dropped 4.5% last month from a year earlier, the Ministry of Finance said in a statement on Tuesday. That was despite exports rising in September for the first time in more than a year.
Imports shrank 12.3%, compared to economist expectations for a 15.2% decline. (…) Overseas shipments of chips fell 6.5% in October. (…)
