Bank economists see rise in US lending after years of decline

Jan 14, 2011, 16:52 GMT

Washington - A panel of economists from top US banks on Friday predicted financial firms would boost loans to consumers and businesses in the United States this year, the first such gain since the 2008 financial crisis.

The expectation was part of a wider optimism that the world's largest economy will grow faster in 2011, though the panel said the United States would only truly regain its footing when there is a sharper drop in unemployment.

'We need more evidence of solid job growth to really say we are in a self-sustaining economic expansion,' said Stuart Hoffman, chief economist of PNC Financial Services Group.

Lending to households will climb 2.7 per cent in 2011, while loans to businesses will rise at an even faster pace of 4.3 per cent, predicted the Economic Advisory Committee of the American Bankers Association, which represents banks in the United States.

Loans to both consumers and businesses had fallen sharply in the past few years as banks sought to fix their balance sheets in the aftermath of the 2008 financial crisis. Business lending plummeted 18.6 per cent in 2009 and 6 per cent in 2010.

The committee forecast the wider US economy would grow 3.3 per cent in 2011, up from 2.8 per cent in 2010 and roughly in line with the Federal Reserve's expectations. But unemployment was projected to fall only to 9.1 per cent by the end of the year from its current level of 9.4 per cent.

Inflation was predicted to remain at a low of around 1.6 per cent for the year, giving the Federal Reserve more time to boost the economy by keeping interest rates low and injecting more money into the system.

Hoffman said the committee was convinced the US central bank would finish its current round of monetary stimulus, purchasing 600 billion dollars in Treasury securities by June, but was likely to be 'dormant' over the second half of the year.

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