You may have noticed that the slowdown in loan dynamics is lagging the tightening cycle: while the progression of loans to companies peaked in the third quarter 2008 before it slowed down rather rapidly, the BLS suggests that banks were already tightening credit standards since the early stage of the crisis in the second half of 2007.
In other words, the information on credit standards from the BLS serves as a lead indicator. While the correlation between loan growth and credit standards is not perfect, the available evidence suggests that loan growth will stabilise shortly and subsequently pick up in the course of 2010. This prediction is in line with an ad hoc survey we carried out very recently.