Credit boom accelerates

The latest statistics On bank lending from the Federal Reserve show a sharp $29.6 billion increase in bank lending for the latest week. Weekly numbers are of course very volatile and their movements should thus be interpreted cautiously, but recent trends point in the same direction, with bank lending increasing no less than 13.8% since the beginning of the year and 11.1% since a year before. As has consistently been the case for the last few years, real estate loans have increased even faster, up 15.9% at annual rate since the beginning of the year and up 15.4% since a year before. What is interesting is that recently, loans to businesses have increased even faster after having declined previously for the last few years. After having declined by 19.5% from its February 2001 peak to its May 2004 lows, business lending have increased sharply, although it has not yet reached the February 2001 peak. Since the beginning of the year business loans have increased no less than 19.7% at an annual rate while being up 12.8% since a year ago. This indicates that the current economic expansion is increasingly driven by business investments, just as I predicted i my Las Vegas speech .