“To economists, the message from the last two years of economic weakness has been clear: It’s the business sector, stupid,” writes Daniel Altman in today’s New York Times.

“Consumers have kept up their spending, thanks to low interest rates on credit cards and mortgages. But the nation’s job losses are unlikely to be reversed, economists say, until companies have the confidence to grow.”

“By one indicator — changes in banks’ commercial lending — that is said to be a favorite of Alan Greenspan, the Federal Reserve chairman, confidence may be starting to take hold. The overall trend in net lending — new loans minus repayments — has been dipping for more than two years. Yet, a change of direction in the demand for loans seems to be under way.”

” ‘There’s a cautious optimism,’ said Todd C. Moules, executive vice president for corporate banking at the National City Corporation. ‘There are people who have a vision of when they expect things to come back. They’re seeing signs of improvement.’ “

“Six months ago, Mr. Moules said, his clients had no such hopes. Yet some recent data on the economy has suggested that better times are on the way for businesses.

Yesterday, the Fed reported that industrial production edged up 0.1 percent in May, exceeding analysts’ expectations. The utilization of industrial capacity was unchanged from a revised April figure of 74.3 percent.”

“The Commerce Department reported that housing starts rose by 6.1 percent in May on a seasonally adjusted basis, with permits for future construction increasing 3.7 percent.”

“Together, the promising news, based on market interest rates, seems to have led investors to expect just a quarter-point cut in interest rates, rather than a half-point, by the Federal Reserve next week.”

“In commercial banking, hopeful signs could not come soon enough. Even as businesses have cut back in the face of higher spending by consumers, commercial lending has wilted while mortgages and credit card debt have bloomed.”

“Commercial and industrial loans held by the biggest banks, those classified by the Federal Reserve as those with $300 million or more in assets, have dropped steadily since March 2001 — the month the most recent recession began, according to the National Bureau of Economic Research. The previous recession began in July 1990 — about a month after the big banks’ commercial and industrial loans started a downward slide.”

http://www.nytimes.com/2003/06/18/business/18ECON.html