Why the credit crunch is set to get worse – MoneyWeek

Therewasplentyofbadnewselsewhere,too。

Theeurozoneservicessectorslowedtoafour-yearlowandnear-stagnationinJanuaryandDecemberretailsalesslidbyanannual2%,arecorddecline。

InBritain,too,“everyearlyguidetogrowthcollapsingiscollapsing”,asMichaelSaundersofCitigroupsaid。

Housinghasturneddownandasurveyofmanufacturingthisweekpointedtotheweakestactivityinmorethantwoyearsandbusinessconfidenceintheservicessectorisatasix-yearlow。

Whyit’sgoingtogetworse

Meanwhile,thecreditsqueezeisgettingworse,whichwillputfurtherdownwardpressureongrowthaslendingdeclines。

IntheUS,thelatestFedsurveyofloanofficersshowsbanksexpecttotightenlendingevenmoreinthefirstquarter“onnearlyeveryconceivabletypeofloantohouseholdsandbusinesses”,notedCapitalEconomics。

Morethanhalfofbanksaretighteningstandardsonprimemortgagelendingandanunprecedented80%areclampingdownoncommercialrealestatelending。

InEuropeit’sasimilarstory。

Withthesecuritisationmarketclosedandbalancesheetsthusswollenwithdebtthatcannotbesoldon,it’snowonderaJanuarysurveybytheEuropeanCentralBankshowedcreditconditionstightenedat41%ofeurozonebanks–aboutathirdmorethaninitsOctobersurvey。

InBritain,too,thebanks“arerunningscaredtowardscredittightening”,asIanCampbellsaidonBreakingviews。

com。

DespiteDecember’sratecutthepriceoftrackermortgageshastickedup,andlendingoncreditcardsisalsobeingcutback;Eggcancelledcreditcardsfor160,000customersthisweek。

Withbanksclampingdownoncredit,“the“financingsystemisbroken”andwon’timproveuntilbalancesheetsarerepaired,asJamesSaftsaidinTheInternationalHeraldTribune。

Inthemeantime,theoutlookfortheglobaleconomygrowsdarkerbytheday。

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