Chart 1: Commercial Credit Slowed in 2001 but Remains Stronger than in Past Recessions

Data Source: Federal Reserve Board Flow of Funds (Haver Analytics)

Vertical Axis: Year-Over-Year Change in Total Credit Market Liabilities of Nonfarm Nonfinancial Corporate Businesses (Inflation-Adjusted Using GDP deflator) (Scale = -8% to 14%)

Horizontal Axis: This is a time series showing quarterly data from the first quarter of 1960 to the third quarter of 2001.

Note: Inflation adjusted using GDP deflator

The blue line represents the year-over-year change in total credit market liabilities of nonfarm nonfinancial corporate businesses in real terms (hereafter business credit). Growth in business credit slowed but remained positive in the 1960-61 recession and the 1969-70 recession. Business credit outstanding declined in real terms in three more recent recessions in 1973-75, 1980 and 1990-91. Business credit fell by 1.9 percent between the third quarter of 1979 and the third quarter of 1980 while it declined by 1.5 percent between the first quarter of 1990 and the first quarter of 1991. Business credit grew by 4.2 percent between the third quarter of 2000 and the third quarter of 2001, below the long-term average growth rate of 5 percent.

The red line represents the long-term average of year-over-year changes in total credit market liabilities of business credit. Business credit grew on average by five percent on a year-over-year basis between 1960 and 2001.

The shaded vertical bars represent seven recessions since 1960. These recessionary episodes occurred from the second quarter of 1960 to the first quarter of 1961, the fourth quarter of 1969 to the fourth quarter of 1970, the fourth quarter of 1973 to the first quarter of 1975, the first quarter of 1980 to the third quarter of 1980, the third quarter of 1981 to the fourth quarter of 1982, the third quarter of 1990 to the first quarter of 1991, and the second quarter of 2001 to present.