The banking crisis is having a slow-burn impact on the economy

 https://www.cnbc.com/2023/04/25/the-banking-crisis-is-having-a-slow-burn-impact-on-the-economy.html 

The banking crisis that began just two months ago is being watched closely. Economists have determined that it will most likely lead to a recession through a slow burn. This crisis had already led to smaller banks being more stingy about loaning out money, which impacts economic growth negatively. Bank earnings largely have been decent for the first quarter, but the sector’s future is uncertain. Stocks have been under pressure, with the SPDR S&P Bank ETF (KBE) off more than 3% in Tuesday afternoon trading. In the immediate future, the reading on first-quarter economic growth is expected to be largely positive despite the banking problems. That growth, though, isn’t expected to last, due primarily to two interconnected factors: the Federal Reserve interest rate hikes aimed purposely at cooling the economy and bringing down inflation, and the constraints on small-bank lending. First Republic, for one, reported that it suffered a more than 40% decline in deposits, part of a $563 billion drawdown this year among U.S. banks that will make it tougher to lend. Consumer spending has seemed to hold up fairly well in the face of the banking crisis, with Citigroup estimating excess savings of about $1 trillion still available. However, delinquency rates and balances are both rising: Moody’s reported Tuesday that credit card charge-offs were 2.6% in the first quarter, rising by 0.57% from the fourth quarter of 2022, while balances soared 20.1% on an annual basis. Where the economy and possible recession lead to is all up to the consumer. Consumer demand is currently approaching pre-pandemic levels, but if consumers cannot get those lending services from banks, it will quickly tarnish the progress made.