Banks are seeing steady growth in consumer loan demand nationwide, particularly in auto loans and mortgages, according to a report released Wednesday by the Federal Reserve Board.
The central bank's "Beige Book" reported moderate or flat improvements in commercial lending, but said that demand for consumer credit was up in most districts.
The periodic review of economic activity noted "strong increases" in demand for auto loans, particularly in the Philadelphia, Chicago and Atlanta districts. Demand for mortgages in the Cleveland, Chicago, Richmond, Atlanta and St. Louis districts was also improved, the Fed said.
The New York Fed reported that the strong dollar has put some downward pressure on retail sales this summer, but noted that small and medium-sized banks reported "increased demand across all loan categories, with the most widespread gains for commercial and residential mortgages." The Philadelphia Fed, meanwhile, said that in addition to auto loans, commercial and industrial loans and commercial real estate loans are the "segments with the strongest growth in volumes" since the last beige book.
The Chicago Fed said that consumer and business loan demand had increased moderately, while small business lending declined and middle-market commercial loan demand had increased. There was some concern among lenders that commercial real estate valuations in the district were too high, making lenders less willing to fund certain projects.
The San Francisco Fed, meanwhile, said that healthy borrower balance sheets made lenders willing to extend credit, but some borrowers "remained somewhat hesitant to leverage and expand operations" and that net interest margins are "compressed," meaning that "interest rate risk will pose a challenge to returns in the near term."
The St. Louis, Kansas City, Dallas and Minneapolis Fed Banks reported credit conditions essentially unchanged and loan demand flat or marginally increased.
The decline in energy commodity prices has continued to put downward pressure on the energy industry, drastically reducing the demand for capital, workers and associated industries. The Dallas Fed said that most contacts "are resigned to a 'lower for longer'" oil price forecast and that "outlooks for the next two quarters are negative."
Not all regions are experiencing the same growth in loan demand. The Richmond Fed said that residential real estate demand was mostly flat throughout the region, and credit standards were tightening in West Virginia. The Atlanta Fed said there was credit available to qualified borrowers but that competition for those customers remained "elevated" and that though credit is available, "many firms used cash for capital expenditures or funded investments internally."