High borrowing costs continue to hamper economic growth in industries tied to heavy equipment, although transportation and agriculture sectors in some regions have reason for optimism.
An increase in retail activity contributed to slight growth in transportation sectors but tight ocean shipping capacity led to higher spot rates, according to the July 17 edition of the Federal Reserve’s Beige Book based on data compiled through July 8. The monthly report provides an overview of economic conditions and challenges specific to the Fed’s 12 regional districts.
In the Atlanta Fed’s region, there was a slowdown in Class 8 truck orders. Decreased demand for warehouse and distribution space contributed to “lower than normal” seasonal demand, the report states.
In the Richmond region, soft demand and carrier rates as low as $1.10 per mile contributed to a worsened trucking segment, according to the Beige Book. Three key industry trends affecting the trucking segment in the region included owner-operators shutting down their operations and joining bigger companies, chassis rental defaults and stagnant high prices resulting in fewer sales on the resale market.
Agriculture results mixed across U.S.
Agricultural conditions varied considerably across regions due to sporadic droughts affecting crop yields and, consequently, the supply chain of agricultural products.
In the Minneapolis Fed’s region, lenders overwhelmingly reported weakened farm income year over year in the second quarter, stymieing agricultural output. Farm income is expected to decline even further in the coming months.
In the Atlanta region, agricultural conditions are on the upswing, with dairy farmers seeing especially strong demand and higher sales prices. The Dallas region also reported an overall improvement in agricultural conditions, although crop prices have dropped below production costs for many producers.
Rates continue pressuring lenders
High interest rates mitigated demand for consumer and business loans, affecting overall economic momentum.
Small and medium-sized banks in the New York region, for instance, reported soft loan demand and minimal refinancing activity. Delinquency rates also rose.
The Dallas region, however, reported increased loan volumes in June despite the tight lending environment.
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