The latest Fed and ECB bank lending surveys are consistent with the forecast here of solid global economic growth through late 2014.

The net percentage of banks easing credit standards on loans to smaller firms* tends to lead the economic cycle, though is less informative for forecasting purposes than real narrow money trends. The Eurozone indicator turned heavily negative ahead of the 2008 recession and rebounded before the 2009 recovery – see first chart. Behaviour around the 2011-12 recession was more coincident than leading (in contrast to real narrow money). The latest reading is consistent with respectable economic growth**.

The corresponding US series has a longer history and has correlated similarly well with the economic cycle, with the latest result again solid – second chart.

The forecast that six-month global industrial output growth will rise from a short-term low in May through late 2014 rests on faster real narrow money expansion since late 2013 and a more recent recovery in the longer leading indicator followed here. A final March reading of the leading indicator will be available on 13 May, with preliminary data suggesting another monthly increase – see previous post.

*Net percentage easing = net percentage tightening multiplied by -1. Larger firms are less reliant on bank lending.
**Eurozone banks are also asked whether they expect to ease standards next quarter; the net percentage was stable at a seven-year high in the latest survey.