Bank loan demand increased slightly this spring, and delinquency rates leveled off, the Federal Reserve reported Wednesday.
Moderate gains in commercial and consumer lending were nearly offset by weaker residential mortgages and home refinancing in several districts, according to the Beige Book, the Fed's periodic economic report. The report, which covered March and April, found the trends particularly prevalent in the New York and Dallas districts.
The Federal Reserve Bank of Kansas City bucked the trend, showing increased lending in every category except agricultural loans. It also reported significant increases in money market, demand deposit, and NOW accounts. The St. Louis Fed was offbeat in the other direction, with a 0.1% decline in commercial and industrial loans, a 0.8% decline in consumer loans, and an increase of 3.6% in real estate loans.
Overall demand for consumer loans increased in Atlanta, Philadelphia, and Dallas, but decreased in Chicago and St. Louis. It remained steady in Cleveland, Richmond, and Kansas City, the Fed said.
Credit quality was unchanged in most districts, except for St. Louis, whose banks reported a slight rise in nonperforming loans. The Federal Reserve Bank of New York noted "delinquency rates, which had been rising, leveled off in the past two months."
The economy as a whole grew throughout March and April at "a moderate pace," with many districts noting that the "pace of expansion had quickened lately" and that inflation had been "generally subdued," the Fed said.
Economists said the report supports their belief that the Federal Open Market Committee, the central bank's chief policy group, will not increase rates at its next meeting May 21.
"I think they'll not make any change in monetary policy," said James W. Coons, senior vice president and chief economist at Huntington National Bank, Columbus, Ohio.
Christine Chmura, chief economist at Crestar Bank in Richmond, Va., agreed, saying, "They are seeing moderate growth, not fast growth, so I would not expect them to raise rates."
Ms. Chmura said weaker residential lending had been expected. "With the pickup in the economy you see a greater demand for commercial and consumer lending, but given the rise in mortgage rates, demand for those loans should slow," she said.
Mr. Smith writes for Medill News Service.