Chart of the Day: Loan growth slips into the red for the first time since GFC

External and domestic pressures are to blame.

Overall loan growth slipped into the red for the first time since the US financial crisis in May, according to this chart from DBS.

Loan growth registered -0.1% year-on-year in May, the first decline since October 2010. According to DBS, moderation in consumer loan growth as well as further contraction in business loans have driven the headline number into negative territory.

“Business loan growth has recorded two consecutive months of decline and consumer sentiments are obviously cooling as well. Beyond a cloudy global outlook, pressure from domestic restructuring, property market cooling measures and risk of higher interest rate are weighing down on business confidence and consumer sentiments. These present significant downside risk to growth if such downward trend persists in the coming months,” DBS said.

DBS warned that the contraction in loan growth, along with a slew of other negative statistics, shows that Singapore’s growth outlook is certainly “turning southward”.

“Employment has fallen by 6100 jobs in the first quarter, the first quarterly decline since the Lehman crisis. Core inflation dipped to near zero level of 0.1% YoY in May, the lowest since Jan10. Negative output gap is widening, suggesting further slack within the economy. Adding the slew of bad news up will naturally equate to downside risk on growth. Plainly, a GDP contraction in the second quarter is almost on the cards,” DBS noted.