Beige Book: Economy Expands at Measured Pace



According to the Federal Reserve’s recently released Beige Book, reports from the twelve districts indicated that economic activity expanded at a measured pace in recent weeks. A number of districts expressed concern and uncertainty about the federal budget, especially the fiscal cliff.

Highlights include:

Manufacturing

Conditions in the manufacturing sector were mixed, though on balance, most districts reported that conditions had weakened since the previous report. Noteworthy gains in manufacturing related to the aerospace industry were reported in the Richmond and San Francisco districts, while demand for aviation equipment held steady in Dallas. Manufacturing contacts from five districts expressed concern about the outlook for 2013, in part, due to the uncertainty regarding the outcome of the fiscal cliff.

Banking & Financial Services

Loan demand generally was either mixed or slightly stronger across most districts in recent weeks. New York reported that demand for commercial and industrial loans weakened. Richmond said that a small commercial banker was encountering a slight improvement in overall loan demand but added that consumer loans were unchanged from “meager” levels and small business loans were virtually non-existent. Chicago noted that small business loan demand experienced modest growth, but a decrease in credit demand occurred among middle-market customers. St. Louis added that, while credit standards for commercial and industrial loans were largely unchanged, both the demand for these loans and the number of inquiries ranged from moderately lower to moderately higher.

Credit standards and credit quality were somewhat improved, on net, since the last report. Chicago, St. Louis and Kansas City noted that credit standards on most types of loans were unchanged, and Dallas cited a loosening of credit standards, which contributed to very competitive loan pricing. Atlanta reported that underwriting standards had become more restrictive and burdensome since its last report, both in terms of credit scores and information requests. With respect to loan quality, New York reported that delinquency rates increased in the commercial and industrial segments. Philadelphia contacts cited moderate improvement. Cleveland and Richmond noted improvements in delinquency rates across consumer and business loan categories. Richmond added, however, that some contacts were concerned that banks were increasing their risk exposure by making longer-term loans in an effort to get higher yields.

To read the full Beige Book report click here.


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Terry Mulreany
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