NEW YORK (Reuters) - A slowdown in U.S. business loan growth reflects a hangover from the energy sector contraction of 2015 and 2016 rather than a fall in investment demand, analysts at Goldman Sachs said in a note on Wednesday.


The sharp deceleration in Commercial & Industrial (C&I) lending has caused concern among some market watchers. Such lending tends to correlate to the market, although it lags equities, according to official data analyzed by Thomson Reuters.


Goldman said that explanations for a slowdown, such as a step-down in investment demand or a sudden tightening in credit conditions "seem at odds with recent growth and financial indicators, including a strong start to the year for corporate debt issuance."


"An alternative explanation is that C&I bank loans represent yet another casualty of the energy sector contraction of 2015 and 2016," Goldman economists including Jan Hatzius wrote.


After rising consistently from its low point in 2010, C&I loan growth stalled in late 2016 and has fallen in 11 of the last 17 weeks, Federal Reserve data shows. Since hitting a record of more than $2.1 trillion in November, total C&I loans outstanding have fallen about 0.7 percent to $2.09 trillion as of mid-March.


John Williams, president of the Federal Reserve Bank of San Francisco told reporters in New York on Wednesday: "It's early days on the data but I don't see it as worrisome for a number of reasons."

"I talk to a lot of people both on the lending and the borrowing sides and I've not heard any accounts that it's somehow harder to get credit, or that the demand for credit has slowed a lot," Williams said.

Goldman said that in late 2015, debt markets seized up as oil prices fell into the mid $40 range. Many firms lacked access to capital markets and their ability to generate cash was impaired by lower commodity prices. They turned to pre-existing credit facilities, accelerating C&I lending.

"Following a brief acceleration in C&I lending in early 2016, bank loan growth waned in late 2016 and early 2017 once capital markets reopened and banks renegotiated and restructured credit lines," Goldman wrote.

The bank said that "the credit line payback story is the most likely explanation of the current C&I loan shortfall, which we peg at roughly $100 billion."

(Reporting by Megan Davies and Jonathan Spicer, Additional reporting by Dan Burns; Editing by Alistair Bell)