From the third quarter Phoenix Management “Lending Climate in America” Survey, results show lower expectations for domestic economic performance in both the short and long term.

Lenders indicated deteriorating confidence in how they expect the U.S. economy to perform beyond the next six months with a grade point average of 2.14 in Q3 2015 down from 2.18 in Q2 2015, and compared with a GPA of 2.32 for the next six months. This negative sentiment is further supported by a significant reduction (19 percentage points) in the overall lending diffusion index during Q3 to a mere one percent, which means that the percentage of lenders that anticipate loan growth is virtually identical to those that anticipate shrinking portfolios. Furthermore, the percentage of lenders anticipating a tightening of their loan structures increased from 5% in Q2 to 16% in Q3, and the percentage of lenders anticipating a relaxation of loan structure decreased from 10% in Q2 to 5% in Q3, which indicates the least attractive market for borrowers since Q4 2009. These sentiments were accompanied by an increase in lenders that anticipate increasing their interest rate spreads. These factors appear to indicate a less attractive market for borrowers going forward.

In addition, lenders were asked what factors would have the strongest potential to affect the near-term economy. Seventy-one percent of respondents believe the stability of the stock market will have the strongest impact on the economy in the next six months, a 27 percentage point increase from the prior quarter. And 77% believe that consumer confidence levels and the stock market performance will be the strongest indicator for U.S. retailers this holiday season.

“It would appear that the tide is beginning to turn, as lenders have increasing concern with the economy, which they anticipate will result in limited/no loan growth, tighter loan structures, and increasing interest rate spreads,” says Michael Jacoby, Senior Managing Director and Shareholder of Phoenix. “The performance of the stock market during the 4th quarter will likely have a meaningful impact on the economy and lender’s sentiments.”

See the full results of Phoenix’s “Lending Climate in America” Survey for Q3/2015.

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