Loan growth lacking but doesn't say much about the economy

From the Edge:

KUALA LUMPUR: The domestic total loan growth in April decelerated to 8.78% year-on-year (y-o-y), as compared with 9.24% in March, as household and business lending slowed.

According to Bank Negara Malaysia’s monthly statistical bulletin in April, the loan application for the month was almost flat; it went up barely 0.7% y-o-y compared to a deceleration of 4% y-o-y in March.

Meanwhile, loan approval contracted by 2.4% compared to an increase of 1.7% a month before.

“On an annualised basis, loans grew 5% y-o-y, still lagging our 7% to 8% loans growth expectation,” Kenanga Research analyst Kelly Tan told The Edge Financial Daily when contacted. “Essentially, growth in repayments outpaced disbursements,” she said.

Loan growth is one of those indicators which tells more about the banking industry than the general GDP.  It doesn't say what those loans are good for.  It might not translate to spending, but it will generate revenue for banks.

Loan growth is a bit lagging in that it tells April loan numbers while we are already in June.  I consider it a non event mainly for the reason that we don't know if the loans will translate directly to GDP growth.  Add to that the actual percentage change was pretty insignificant.