Crystal balls never worked very well for predicting GDP...but that’s not the case with the Small Business Lending Index, a.k.a. SBLI.
The Small Business Lending Index tracks the number of new loans and leases given to small businesses. And yep, it correlates with GDP pretty closely, as a leading indicator ahead of GDP around two to five months.
The SBLI isn’t messing around. It collects loan and lease info from over 200 U.S. lenders (thanks to collection by Reuters and PayNet), and indexes loans at the national, state, and industry levels, creating a whopping 988 sub-indices. That’s a lot of indexes. And indices (both are spelling-legal).
So what’s the rationale behind small businesses tracking with GDP? What about the big 'uns? While small businesses have it rough in a lot of ways compared to giant companies, one thing going for them is the ability to react quickly. Big, behemoth companies are slowww. Think: elephant v. fox.
Everyone (from economists to politicians to regulators and investors) are keeping a watch on the SBLI as a leading economic indicator. Size does matter.
