WASHINGTON — Loan demand over the last six weeks has remained moderate, albeit inconsistent, as financial markets continue to be concerned about the fallout from sustained low commodity prices and the strong dollar, according to a report issued Wednesday by the Federal Reserve.

In its regular Beige Book report, the Fed reported generally upbeat but muted and varied demand for loans nationwide. Some regions reported ongoing declines in commercial and industrial lending related to the continued drop in oil and gas prices and secondary effects on manufacturing, while other regions said that loan demand remained modest. 

"In the banking and finance sector, most districts reported slight to modest increases in loan demand, stable credit quality and unchanged credit standards," the report said. "Contacts in Chicago noted that concerns about slower global economic growth had led to declines in equity markets, wider spreads for asset-backed securities, and an increase in financial market uncertainty, an in Dallas, financial market and monetary policy uncertainty had created concerns about 2016 growth prospects."

In the Boston, Atlanta, Chicago and Cleveland Fed districts, commercial and industrial lending and commercial real estate loan demand was down, while residential real estate remained robust. The Cleveland Fed reported that residential sales were up 8.5% in 2015, while the Boston Fed said that Massachusetts experienced the largest December real estate sales volume since 2004.

The Atlanta Fed said improved residential real estate lending was spotty, while the Chicago Fed noted increases in new single-family home construction across urban, suburban and rural areas. The Atlanta Fed said that consumer lending remained somewhat muted, noting that "even with cheap money readily available, some borrowers indicated a continued preference toward deleveraging."

Other districts experienced the opposite effect. The New York, Philadelphia, Richmond and Minneapolis Fed banks reported that commercial and industrial lending or commercial real estate lending was driving moderate loan demand.

The reduced price of oil and gas was most acutely felt in regions reliant on drilling. The Cleveland Fed noted that active rig count was down 62% from its peak, and that transportation volume had also contracted due to "softness in the manufacturing and energy sectors at to high inventory levels." The Dallas Fed said that loan growth "continued to slow" due to subdued overall economic activity in the region, while consumer loans "grew at steady clip" in the last six weeks.

The Kansas City and San Francisco Fed banks noted that both residential and commercial lending activities were up since the last report in January, though the San Francisco Fed noted that banks were facing more competition from financial technology firms in identifying new customers.

"Contacts reported that newly emerging financial institutions have increased market share by leveraging technological advances and big data to reduce search, acquisition, underwriting and transaction costs," the report said.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.