The Federal Reserve said Wednesday that the economy has continued to grow this spring, fueling increased loan demand throughout the country.
"Overall loan demand rose in most districts, although demand for commercial loans and consumer loans varied among the districts," the Fed said in the Beige Book, its periodic assessment of the country's economic condition.
Demand was strong for commercial and industrial loans in the New York, Chicago, Kansas City, Dallas, and San Francisco regions. It was flat or down slightly in Philadelphia, Cleveland, Richmond, Atlanta, and St. Louis.
Consumer loan demand also was up in most Fed districts, including Cleveland, Richmond, Atlanta, Chicago, Atlanta, and Dallas. It was flat or down in New York, Philadelphia, St. Louis, and San Francisco.
Mortgage lending bucked the trend. The Fed reported that originations and refinancings declined nationally.
The Cleveland and Chicago reserve banks reported "intense competition" among banks for borrowers. New York said its banks saw loan delinquency rates fall during the past six weeks.
Economists said the report was full of good news.
"From an economic point of view, we have a moderate to healthy economic growth with little inflationary pressure," said Sung Won Sohn, Norwest Corp.'s chief economist. "This combination is good for the financial market and the banking industry. The idea that a strong economy necessarily leads to higher inflation and interest rates is simply not true, as evidenced by the report from the Beige Book."
William Wilson, vice president and economist at Comerica Bank in Detroit, said the data prove the Fed has engineered a soft landing. He added loan demand will remain strong as long as the economy grows.
Mr. Wilson did, however, caution bankers. "The one dark cloud on the horizon is that we know that consumer debt levels are beginning to bite," he said, "Because personal bankruptcies have been up in the past year and consumer delinquencies continue rising."
Banks should keep an eye on credit quality to avoid trouble, he added.
Mr. Sohn said forecasts of gloom are premature, predicting economic growth will continue for the foreseeable future.
Mr. Olaya is an intern with the Institute on Political Journalism, a program of the Fund for American Studies.
