This coming Monday, April 12, the Bank of Canada will release the results of its Q1 2010 Senior Loan Officer Survey. Here are Stewart Hall‘s comments on what he expects these results to be and a little background, taken from his weekly Economic Diary:
Canadian lending officers, on balance, are expected to have eased up on credit conditions. In the previous survey, the balance of opinion at -8.7 was indicative of an outright easing in overall lending conditions. For the current quarter, we are looking to see continued improvements in both the price and non-pricing elements of credit. To wit, we would point to a turnaround in M3 growth as indicative of a banking sector that is once again beginning to lend and continued improvements in market liquidity contributing to improved pricing for credit. In February, M3 was growing at 3.1%y/y, well ahead of the depressed readings recorded in the final quarter of 2009 when on average, M3 growth was running at less than 1%y/y.
On a cautious note, business lending remains depressed, having contracted by 0.5%y/y in February. However, corporate demand for credit is believed to have remained weak as businesses remain reticent to expand capacity and invest in their companies given the large amount of excess capacity sloshing about in the domestic and global economies.