December 2 2010 (Chris Moore)
The Federal Reserve released their Beige Book on December 1st and reports from the twelve Federal Reserve Districts indicate that the economy continued to improve, on balance, during the reporting period from early/mid-October to mid-November.

The Beige Book is a report published eight times a year by the Federal Reserve Board. It is formally known as the Summary of Commentary on Current Economic Conditions. The information in this most recent report includes data before Nov. 19.

Overall, the twelve districts of the Federal Reserve indicated that the economy had improved on most fronts except for housing and construction. Manufacturing and tourism expanded in almost all of the districts. Retail spending also increased, and is expected to continue with the holiday season.

The book also notes that employment very slightly increased, but that “employers are waiting for clearer signals of expanding business prospects before adding significantly to payrolls.”

Residential real estate and construction activity remained at a low level in all Districts. The Philadelphia, Atlanta, St. Louis, and Minneapolis Districts reported some further weakening in home sales. Boston, New York, and Richmond characterized the market as soft; while Cleveland, Kansas City, Dallas, and San Francisco described the market as sluggish.

The Chicago District reported that high inventories of unsold homes continued to be a drag on new residential construction and home prices. Residential house prices were mixed. Price declines were observed in New York, Philadelphia, Atlanta, and Kansas City; prices were flat to up in Minneapolis, and prices edged up in Boston.

The Dallas District reported that home prices increased on a year-over-year basis. The rental market continued to offer incentives to tenants in New York, while strong demand for rental units was reported in Richmond and Dallas. Outlooks for 2011 were mixed.

Banking conditions remained stable across most Districts. Lending activity was reported as steady or unchanged in New York, Philadelphia, St. Louis, Kansas City, Dallas, and San Francisco, while a slight improvement was noted in Cleveland, Richmond and Chicago.

The Atlanta District reported constrained credit conditions and weak loan demand.

Contacts in Chicago and Dallas said that increased competition for high-quality borrowers resulted in more aggressive loan pricing. Demand for commercial and industrial loans was generally stable, though several Districts noted improvements in specific loan categories.

The Cleveland and Chicago Districts reported increased lending for mergers and acquisitions, and access to credit by small businesses in Atlanta improved slightly. Consumer lending has remained stable at weak levels in most Districts.

The San Francisco District reported that loan demand declined slightly as a result of households’ desire to deleverage, while Chicago saw a small pickup in consumer lending.

Several Districts reported increases in lending related to residential real estate, and, in particular, to refinancing activity. Reports on changes in credit standards were mixed.

Bankers in New York reported a tightening in credit standards across all loan categories, Kansas City contacts indicated no change in lending standards, and Atlanta reported an easing in standards for small firms.

Contacts in the Cleveland, Richmond, and Chicago Districts reported improved credit quality, but San Francisco bankers noted ongoing struggles with credit quality.

The Cleveland and Richmond Districts both reported declines in delinquencies.

Tags: federal reserve, construction, housing, mortgage rates, delinquencies, lending standards, credit standards, credit quality, real estate, banking conditions