TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/134983
The Latest or ig i nat ion ANALYTICS S e c on da r y M a r k e t a na ly t ic s se r v ic i ng Loan demand, according to the Beige Book, was "steady to slightly up" at most of the district banks that commented on lending. Beige Book Sees Moderate Growth, Sequester Threat Months after news of the budgetary sequester broke, fears linger. D espite threats from the federal budget sequester, the nation's economy expanded "at a moderate pace" from late February to early April, the Federal Reserve reported in May in its periodic Beige Book. Activity in five Federal Reserve Districts—Cleveland, Richmond, St. Louis, Minneapolis, and Kansas City—was described as growing at a moderate pace, while in five other districts—Boston, Philadelphia, Atlanta, Chicago, and San Francisco—growth was notched slightly lower as 60 | The M Report "modest." In the two remaining districts—New York and Dallas— growth "accelerated slightly" since the previous Beige Book seven weeks prior. While most districts reported an increase in manufacturing (specifically in industries tied to residential construction and automobiles), several reported "uncertainty or weakness in defense-related sectors," a clear reference to the federal budget sequestration cuts, which began March 1. The previous Beige Book had been issued on March 6, too soon to reflect those cuts. At the same time, the Beige Book said "consumer spending grew modestly," with some districts citing higher gasoline prices, expiration of the payroll tax cut, and winter weather as "restraining sales growth." Reports from four districts— Boston, Philadelphia, Richmond, and Chicago—specifically cited concerns about the federal sequester cuts. The Richmond report expected a reduction in government-rate hotel bookings and speculated "that sequestration had put potential [home] buyers on the sidelines." The Chicago report said that "uncertainty surrounding sequestration had affected their customer's [manufacturing] orders," while in the Philadelphia district, the sequester slowed financial transactions, and the Boston district cited contacts who said that "the federal sequester poses a threat to [Rhode Island's] defense industry." Indeed, according to the Beige Book, "numerous districts reported uncertainty or weakness in military or defense-related sectors," with the San Francisco district reporting furloughs, layoffs, and plant closures at defense-related manufacturers. Meanwhile, "military customers in the Chicago district were taking measures to lower costs in anticipation of tighter future defense budgets." Those concerns were offset by reports of "strength in residential construction" increasing manufacturing in several districts, which, in turn, caused an uptick in demand for wood products. According to the report, "a sawmill in Montana restarted production after idling for more than four years," and "a Dallas district lumber firm noted a seasonal demand increase for the first time in several years." At the same time, the Beige Book said, "automobile sales remained strong or increased moderately" in most of the country since the last report, with "a slight decline in sales of used vehicles" in New York and Cleveland. Residential real estate activity, the report said, "continued to improve in most districts" with some—notably Cleveland, Richmond, Chicago, Minneapolis, Kansas City, Dallas, and San Francisco—reporting "increased momentum since the last report." New York, the Beige Book summary said, reported "especially strong improvement in residential real estate—both in for-sale housing and apartment markets." Home sales continued to rise in most districts, though low inventories crimped growth in Boston and Richmond.