Economic indicators

The personal consumption expenditures index showed headline inflation flat at 2.5%, but the details of the report explain the Federal Reserve's reluctance to adjust interest rates.

Officials in the Trump administration have floated the idea of changing how the government measures economic growth. Economists say the shift would create new expenses for banks.

While companies trust banks and typically maintain their core relationship with small businesses, the industry's dominant position is hardly set in stone, according to a survey by American Banker.

Lower inflation doesn't equate to lower prices, and costs of living may still be higher than pre-pandemic, especially rents. But the varying cooldown could help.

Other estimates suggest nonbank mortgage employment grew in July as the industry cautiously added staff to handle incremental growth in demand for loans.

Late payments, which have been on a steady rise since 2021, are now climbing at a slower rate or even declining at some major card issuers. Risks remain, but there's 'reason to be cautiously optimistic," one analyst said.

The Cleveland-based bank is projecting steady growth in net interest income even as credit losses remain manageable. But Chairman and CEO Chris Gorman also said that he thinks a recession is likely.

Federal Reserve Governor Christopher Waller said he'd like to see the central bank's holdings of mortgage-backed securities go to zero. 

The American Bankers Association's latest credit conditions indices show that economists at major banks are feeling more confident about commercial lending in 2024 — but they stop far short of a ringing endorsement.

Executives at America's largest banks are making rosier predictions about the financial health of U.S. households than they were a year ago, when their forecasts proved to be overly pessimistic.

A key gauge of activity that tracks startups most likely to create jobs declined in October, potentially signaling the start of a slowdown after the rapid increase in interest rates. It presents a red flag for community banks and credit unions that are major lenders to small businesses.

Broader economic factors, including growing household debt, are also likely to keep the housing market stagnant, Freddie Mac said.

Banking executives anticipate that loan demand will remain muted over the next 12 months, according to a new survey by the financial services firm IntraFi. That finding lines up with bankers' expectation that rates won't start declining until at least the second half of 2024.

The financial landscape is currently riddled with warning signs that point toward potential liquidity issues for banks.

Mergers and acquisitions are rebounding and equity capital markets are thawing, says C.S. Venkatakrishnan. That's a welcome forecast after a persistent slump sapped investment banking revenue across the industry. 

More than half of 526 respondents to a Markets Live Pulse survey said that personal consumption — the most important driver of economic growth — will shrink in early 2024, which would be the first quarterly decline since the onset of the pandemic.

As consumers' cushion shrinks, they are becoming more dependent on their paychecks to maintain their standard of living. Economists are split on whether wage growth is strong enough to fill the gap.

Community bankers anticipate that interest rates could soon level off and the broader economy may avert a downturn as a result. If that forecast proves true, lenders could minimize credit losses and enjoy stronger loan demand than they had expected earlier in the year.

Stock markets have shot up as investors grow hopeful that the United States will avoid a recession. But nearly 3 in 4 community bankers are less optimistic that the Fed will achieve its mission of reducing inflation without causing a downturn, a survey from IntraFi found.

They're wary of deteriorating economic conditions and the bite higher interest rates could take out of profits, according to the latest index of small-bank executives' sentiments by the Conference of State Bank Supervisors. The index fell to its lowest level since it was created in 2019.