Decline in loan demand from energy companies likely to hit US banks

By FXStreet FXStreet (Mumbai) – The oil price plunged on Monday to hit 11 year low. Oil price fell 2 per cent and dropped to $36.05. The slump in oil price in the last one year is largely the result of an over-supply sparked by OPEC’s market strategy. This slump has hurt major economies of the world. To begin with lower oil prices have hindered inflation growth in many countries causing the central banks to keep interest rates at record low levels. The central banks’ objective is to spur demand and in the process raise prices. However, in the process savings has been hurt. Investors started moving towards more volatile stock markets in hope of getting better returns on their investment.

How oil slump will impact loan demand?

Slump in oil prices hurt the energy companies, whose sagging profits have called for measures to slash spending. They have laid people off. This in turn affected employment rate. The spending capacity thus came under pressure as people lost jobs and even wages were slashed. Given people bought less goods, inventories increased. Businesses in the process of offloading unsold goods did not expand activity. Thus manufacturing activity suffered. Number of new orders fell. Overall corporate profits …read more

Source:: FX Street