Beige Book: ‘Faster Growth Expected Over Coming Months’
According to the most recent Federal Reserve Beige Book, reports from the twelve Federal Reserve Districts suggest that national economic activity continued to expand during the reporting period of mid-November through late December, with most Districts reporting a “modest” or “moderate” pace of growth. In contrast, the Kansas City District reported only slight growth in December. However, most of their contacts, along with those of several other Districts, expect somewhat faster growth over the coming months.
The following highlights were excerpted from the Beige Book report:
Manufacturing activity expanded in most Districts. Philadelphia reported that manufacturing activity grew at a modest pace during the current reporting period, with a slight slowdown relative to the previous period. Reports regarding new orders and shipments in the Philadelphia District suggested some further slowing moving forward. Manufacturing shipments and new orders grew modestly in the Richmond District. Contacts at factories in the Cleveland District reported that demand increased a bit on balance. Manufacturing activity grew at a moderate pace in Boston, New York, Chicago, and San Francisco. However, a manufacturer in the Boston District indicated that congestion at West Coast ports had impeded its exports. Activity in the auto industry in the Chicago District remained a source of strength for the region. Atlanta reported that manufacturing activity strengthened overall. Minneapolis and Kansas City reported that manufacturing activity increased only slightly during the reporting period.
Demand for business and consumer credit grew during the reporting period. Overall loan demand increased slightly in the Richmond, Kansas City and Dallas Districts. Philadelphia reported a modest increase in total loan volume. Contacts in the San Francisco District gave mixed reports regarding total loan growth. Demand for business credit in the Cleveland District grew overall during the reporting period. Demand for auto loans in the Chicago District grew moderately, and one contact noted a significant spike in credit card applications.
Credit quality generally remained good, with overall reductions in loan delinquencies. According to the Philadelphia District, most of their financial industry contacts reported continued improvements in their customers’ overall credit quality and in their own loan portfolios. However, high rates of severely distressed mortgages persisted in New Jersey and Pennsylvania. Contacts reported little change in their own lending standards. However, several Districts commented that their contacts indicated that stiff competition for high-quality borrowers was leading to lower underwriting standards among lenders more generally.
Bankers reported that demand for business credit exhibited modest to moderate growth during the past six weeks. While demand was described as broad based, it was strongest for commercial real estate and commercial and industrial loans. Consumer credit demand moved slightly higher, especially for auto loans and home equity products. Households are making marginally greater use of credit cards. Though the pricing environment remains competitive, interest rates were mainly steady for business and consumer credit and for residential mortgages. Many of our respondents noted that activity in their residential mortgage business has declined considerably. One banker reported that nonbank entities seem to be the biggest source of growth in residential mortgages and that it is becoming less and less a part of his business. Delinquency rates were stable or improving across loan categories. No changes were made to loan-application standards since the last report. Core deposits were described as good or strong and growing. A majority of bankers indicated that payrolls are rising at a slight pace, especially in the areas of commercial lending, risk management, and regulatory compliance. A few reported that they are beginning to feel some wage pressure and expect that it will intensify in 2015.
To read the Federal Reserve Beige Book report, click here.