While the accelerating rollout and inoculations of COVID-19 vaccinations are raising economic optimism in some districts across the country, some challenges remain for financial institutions in non-mortgage lending as deposits continue to rise, according to the latest Beige Book released Wednesday.
In its semi-monthly report summarizing economic and financial conditions from around the country, the Federal Reserve said some of the contacts with its district banks report declines in loan volumes at financial institutions. However, the Fed said most contacts with its districts cited lower delinquency rates and elevated deposit levels (which, as in the case of some credit unions and community banks, has led to a deterioration of loans-to-savings ratios, an indicator of financial activity).
The Fed report also noted that all-time-low mortgage interest rates “continued to spur robust demand for both new and existing homes” in most Fed bank districts. The report also notes that home prices continued to rise in many areas of the country. However, real estate conditions for hotels, retail spaces, and office sectors deteriorated, the Fed report stated. Activity in the multifamily sector remained steady and the industrial segment continued to strengthen, the report stated.
The word “optimism” or a derivative of it appeared in summaries of the report for at least three districts: Boston, New York, and Kansas City. Boston contacts in the restaurant and hotel industries expressed a more optimistic outlook, the Fed report stated. In New York, the report stated, “contacts across a wide variety of sectors expressed increased optimism about the near-term outlook.” In Kansas City, the Fed reported that contacts were generally optimistic about future growth, driven in part by the COVID-19 vaccine rollout.