Credit impulse
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Repayable financial benefits - measures of economic activity.
In the context of the credit impulse measure, credit is the provision or availability of loans or other repayable financial benefits by a bank or other lender.
The credit impulse is defined as:
- Annual change in new credit provided / GDP
The use of the credit impulse measure is as a leading indicator of growth in GDP.
(The credit impulse concept and definition was coined in 2008 by Michael Biggs, when working as economist at Deutsche Bank.)
- Credit impulse alone is not a sufficient metric
- "a lot of liquidity – or if you will, cash – that the post-pandemic recovery policies created is now sitting idle. This fact is masked if you only consider metrics such as the credit impulse or global money creation, as captured by the change in M2, a metric related to money supply.
- There’s nothing wrong with these measures – they are intended to gauge trends in the availability of credit and money, and they do just that.
- However, in times of great change, or structural breaks as we call them in econometrics, these movements can be deceiving."
- Tamara Basic Vasiljev, Senior Economist, Oxford Economics - The Treasurer, March 2023, p21.
