Lending activity increases a bit, with commercial real estate leading, Beige Book reports

Lending activity picked up slightly toward the end of 2021, led by commercial real estate borrowers, the Federal Reserve reported Wednesday in its latest Beige Book.

The most recent book, reporting on the last several weeks of last year, also included reports from Federal Reserve districts that banking “remained steady” and noting “ongoing improvement in business conditions” in the finance sector.

However, there were some points of concern noted. One contact, according to the report, noted concern that a bubble was forming in home mortgages. However, the overall view was that home values were sufficient to allow most homeowners to sell their properties and pay off mortgages that had become unaffordable.

The Fed’s Beige Book, published eight times a year, summarizes comments received from outside the Federal Reserve System and, the Fed notes, is not a reflection of the views of Fed officials. The latest report covers the period ending Jan. 3.

Other reported developments: Direct auto lending was still being affected by a lack of car dealer inventory; increases in business loan refinancing were occurring; terms were being adjusted on borrowing (such as extending the duration on new lines of credit) amid subdued loan demand; competition for loans accelerated further, including that from fintech companies.

In other areas, the book asserted that economic activity across the nation expanded at a modest pace. Modest economic growth was constrained, according to reports from district reserve banks, by ongoing supply chain disruptions and labor shortages.

Demand for materials and inputs, and demand for workers, remained elevated among businesses, the book reported. Although consumer spending continued to grow at a steady pace ahead of the rapid spread of the Omicron COVID-19 variant, the book stated, most district banks reported a sudden pull-back in leisure travel, hotel occupancy, and patronage at restaurants as the number of new cases rose in recent weeks.

The outlook for 2022, the book reported, was optimistic; several districts reported that business expectations for growth over the next several months “cooled somewhat during the last few weeks.”

Beige Book – January 12, 2022