Lending Standards Easing for Biz, CRE; Chicago Fed Sees Lackluster Growth

Domestic banks, on average, report easing their lending standards over the past three months--and experiencing stronger demand in several loan categories. And led by declines in production-related indicators, the Chicago Fed National Activity Index decreased to –0.53 in April from –0.23 in March.

The Federal Reserve reported in its April “Senior Loan Officer Opinion Survey on Bank Lending Practices” that domestic banks, on average, report easing their lending standards over the past three months–and experiencing stronger demand in several loan categories. Banks are (relatively) easier these days with business loans, but still a little Scrooge-like when it comes to lending to households.

A relatively “large fraction” of domestic banks said they had eased standards on commercial and industrial loans in the last three months, according to the Fed. More specifically, a “moderate fraction” of domestic banks eased their CRE lending standards over the past three months, and “relatively large fractions” continued to report an increase in demand for such loans. U.S. branches of foreign banks reported that standards on CRE loans were about unchanged, but some reported that demand strengthened on such loans.

A few domestic banks reported easing standards on prime residential mortgages over the past three months, but most have not. Also, for the fifth consecutive survey, banks reported that demand for prime residential mortgage loans had strengthened. The survey is based on responses from 68 domestic banks and 21 U.S. branches of foreign banks

Chicago Fed Sees Lackluster Growth

Led by declines in production-related indicators, the Chicago Fed National Activity Index (CFNAI) decreased to –0.53 in April from –0.23 in March. Three of the four broad categories of indicators that make up the index decreased from March, and none of the categories made a positive contribution to the index in April.

The index is a weighted average of 85 indicators of national economic activity drawn from four broad categories: production and income; employment, unemployment, and hours; personal consumption and housing; and sales, orders, and inventories. A zero value for the index indicates that the national economy is expanding at its historical trend rate of growth, while negative values mean below-average growth and positive values mean above-average growth.

The index’s three-month moving average, the ponderously named CFNAI-MA3, ticked up to –0.04 in April from –0.05 in March. In short, April’s CFNAI-MA3 suggests that growth in national economic activity was very near historical trends. The economic growth reflected in the CFNAI-MA3 also points to low inflation over the coming year, confirming the recent CPI and PPI trends, which are very nearly flat.

Wall Street had a down day to begin the week on Monday, though not by much. The Dow Jones Industrial Average lost 19.12 points, or 0.12 percent, while the S&P 500 and the Nasdaq were both down 0.07 percent.