Red Flags: NFCI and Credit Survey Reveal Economic Stress

The current state of the economy is a topic of concern among many individuals and organizations, and there are indications that both financial and credit conditions have been tightening. The National Financial Conditions Index (NFCI) is a widely used measure of financial stress in the economy, and as of March 17, it was at -0.24. This value suggests that financial conditions have tightened, as the index moves in the opposite direction of financial stress. The negative value of the index indicates that financial conditions are looser than their long-run average, but the fact that the value has decreased indicates a tightening of conditions.

In addition to financial conditions, credit conditions have also been tightening. The University of Michigan conducts a survey of consumer sentiment that includes questions about credit conditions. The data from this survey reveals that credit conditions have tightened to levels not seen since 2008. This tightening occurred even before the collapse of Silicon Valley Bank, which may indicate that the collapse of this bank will exacerbate the already tightening credit conditions.

The tightening of financial and credit conditions has potential economic implications. For example, it may become more difficult for individuals and businesses to obtain loans or access credit, which could slow down economic activity. It is important to continue to monitor these indicators and their potential impacts on the economy.