This week, the Federal Reserve released its most recent Beige Book, which provides an overview of the status of the economy in each of the Fed's 12 regional bank districts, including information on employment, consumer spending, real estate, manufacturing, and other areas. Since the tales are anecdotal, they occasionally conflict. And lending to businesses is one of the areas where the regional banks of the Fed are observing diverse outcomes.
The fact that interest rates are rising has caused many businesses to reconsider borrowing.
Hey, you know, it would have made sense for me to borrow this at 4.5%. But it might be a little tighter if I have to pay 6.5%, said Dominik Mjartan, CEO of Optus Bank in South Carolina.
Business loans provide indicators of the state of the economy's recovery.
That is in the Richmond, Virginia, area of the Fed, which discovered a slight slowdown in the demand for commercial loans.
Mjartan claimed to be observing a slowdown in lending for both residential and commercial real estate.
Investors are reluctant to purchase office property, he claimed, simply because they expect future difficulty.
The Chicago Fed reported that its district's loan demand has also decreased.
La Salle State Bank
Chris Duncan, a senior loan officer at La Salle State Bank, located roughly 90 miles southwest of Chicago, stated that many of his clients are concerned about the state of the economy in 2019.
Even while the situation isn't dire yet, Duncan said, "they're waiting until there's a little more certainty in the prognosis before doing much."
Other Federal Reserve banks, such as those in Cleveland, Atlanta, and San Francisco, reported an increase in loan demand at the same time.
In Southern California, Friendly Hills Bank is operated by Nathan Rogge, who claims that when interest rates rise, some customers are increasingly taking out loans.
They want to take advantage of prices on longer, fixed-rate possibilities, larger pieces of equipment, and real estate before they move more, according to Rogge.
Rogge claimed that manufacturers and distributors are among the companies borrowing money to grow.
They claim that things seem to have stabilised. "They perceive a more defined direction for the business. Their customers are feeling more upbeat. Therefore, everything appears to be moving forward.
Because local economies have been rebounding at varying rates, loan demand may vary by location.
For instance, according to Wells Fargo economist Charlie Dougherty, many large cities have taken longer to recover.
But what about that?
You only need to look at Salt Lake City, Boise, or Phoenix to see how rapidly they have expanded and are still growing.
Overall, he claimed that the Fed reports provide evidence that the expanding economy is rife with weak spots.
