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Fed Beige Book: Growth Pace Slowed Before Shutdown

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WASHINGTON (10/17/13)--National economic activity continued to expand at a "modest to moderate pace" during September through early October, according to the Federal Reserve's "Beige Book" for October, released Wednesday.
Eight of the 12 Federal Reserve Districts reported similar growth rates in economic activity similar to the previous reporting period. However growth slowed in four districts--Philadelphia, Richmond, Chicago and Kansas City, said the report, prepared by the Federal Reserve Bank of Chicago.
The report is being scrutinized more closely because the partial government shutdown has stopped a number of economic reports on activity in September (USA TODAY Oct. 16).
"Contacts across districts remained cautiously optimistic in their outlook for future economic activity, although many also noted an increase in uncertainty due largely to the federal government shutdown and debt ceiling debate," said the report.
It noted consumer spending continued to increase, with travel and tourism sector activity expanding in most districts. Business spending and payrolls grew in many districts. Demand for nonfinancial services rose, and manufacturing activity expanded modestly.

Residential construction continued to increase at a moderate pace, said the Fed report.  Nonresidential construction expanded at a slower rate. Job growth remained modest in September but several districts indicated some uncertainty related to the government debt ceiling battles and the partial  implementation of the new healthcare law.

In the banking and finance areas, the book said, "financial conditions were little changed on balance from the prior reporting period. Overall loan growth remained modest in most districts." The report noted that "consumer loan demand weakened slightly" while mortgage lending was "mixed."

"Several districts noted a decrease in mortgage lending, citing higher mortgage rates and reduced refinancing activity. However, mortgage originations continued to rise in Philadelphia, Richmond and Dallas, and rising home prices led to an increase in home equity lending in Philadelphia, Chicago and San Francisco," said the "Beige Book."

Auto lending rose in Chicago, Cleveland and Atlanta while credit card volumes decreased slightly in Philadelphia. 

Several districts noted a pickup in business loan demand, in both commercial and industrial and commercial real estate lending. Philadelphia, Cleveland, Richmond, Chicago and Dallas districts reported "intense competition on pricing and terms for commercial and industrial loans. "Contacts in Philadelphia and Chicago "expressed concern about an easing of credit standards on these loans.  Overall, however, lending standards were largely unchanged and credit quality continued to improve modestly," said the report.

To access the full report, use the link.

Mortgage Applications: Shutdown Affecting New Homeowners

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WASHINGTON, D.C. (10/17/13)--The government shutdown could be having a chilling effect on would-be new homeowners, according to data compiled by the Mortgage Bankers Association.

The MBA's Market Composite Index, a measure of mortgage loan application volume, increased 0.3% for the week ending Oct. 11. But the Purchase Index decreased 4.8% on a week-to-week basis, with purchase applications 3% lower than they were at this time last year.
For the week ending Oct. 4, purchases were only down 0.7%. While the purchase index declined 5.6% as the shutdown loomed during the week ending Sept. 27, the index was up 6.6% and 2.5% the two weeks prior to that (Moody's Oct 16).

MBA Vice President of Research and Economics Mike Fratantoni said that purchase applications for government programs are down by more than 7%--at their lowest level since December 2007--and that the government share of purchase applications is at its lowest level in three years.

Mortgage refinancing kept the market relatively active and the Market Composite Index up last week. The Refinance Index rose 3% from the previous week, with the refinancing share of total mortgage market activity increasing to 66%, up from 64%.

The MBA survey covers more than three-quarters of U.S. retail residential mortgage applications, and was started in March 1990.

MBA, based in Washington, D.C., represents the real estate finance industry, with a membership of over 2,200 companies.

(See related story: Cheney Hails CU Support For Federal Workers.)