Lending continued to decline during the past six weeks but showed some regional strength in the face of tightened credit standards as the economy continued its modest recovery, a Federal Reserve report said Wednesday.

The Beige Book survey of economic conditions in the Fed's 12 districts painted a muddy picture of loan demand. Volume was mixed, and the central bank reported that lending fell in the Atlanta, Kansas City and St. Louis districts. Demand grew in Dallas. Consumers' appetite for borrowing was mixed as well, growing in the Philadelphia district but contracting in New York.

The report found generally tighter credit standards nationwide; businesses in Atlanta said that tougher credit standards made it difficult to obtain financing.

The quality of loans also varied by sector and by region. The Dallas district "may have turned a corner" on credit quality, but in New York, delinquencies rose in all categories except consumer loans. Respondents in the Chicago district reported higher overall business-loan quality but also more delinquencies in small-businesses loans.

Cleveland district respondents mostly reported that "delinquencies have stabilized or declined," and in the St. Louis district lending activity fell in most categories.

San Francisco bankers reported continued gains in venture capital funding as well as a pickup in commercial loan demand as businesses moved to replenish inventories and replace equipment. Bankers in the Richmond, Va., district also reported a rise in business loans intended for new equipment, as well as demand for Small Business Administration loans.

The survey said that residential housing markets showed gains in every district except St. Louis, though respondents showed skepticism that the trend could continue in the absence of the federal government's tax credits for first-time homebuyers.

The commercial real estate market was slow in each district except Richmond and Dallas, where respondents reported slight growth in commercial leasing activity.

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