The Senior Loan Officer Survey is a long leading indicator, telling us about credit conditions that typically turn worse a year or more before the economy turns down, and improve just at the economy is ready to turn up. Fortunately, since it is reported by the Federal Reserve, it is unaffected by the government shutdown.

The one downside is that the information is only reported Quarterly, and with a one a one month lag. So the Q3 update was only reported on Tuesday.

There are two series that have a long enough record to give us a lot of information. The first is whether banks are tightening or loosening standards. Since tightening is shown as an increase, this is one of those series where higher means worse. 

Historically banks are still tightening, but less so as an expansion begins. As it progresses, they ease lending standards; but  become more cautious well in advance of an ensuing recession. In early 2024, the sharp decline in the percentage of banks that were tightening standards indicated an expansion that was well established.

Interestingly, although at no point during this expansion have banks on net eased, this year the relative progression of banks that moving in that direction has stalled:

This is a neutral reading. It does not look like what has historically happened closer in time to a recession; but on the other hand it does not indicate a strengthening expansion.

In the second series, confusingly, higher does mean better. And in Q3, each measure was slightly positive. Further, while the series are very noisy, there was an unmistakable improving trend in 2023-24, which may be plateauing this year:
 

In any event, the Q3 result indicates business confidence in expansionary plans.

The upshot is that this long leading credit indicator is presently neutral to slightly positive.

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