Fed: Equipment supply chain, commercial lending mixed

Equipment supply chain disruptions have eased, but several regions are still experiencing challenges that drive up costs as commercial lending demand slows. 

The Federal Reserve System Wednesday released the January edition of its Beige Book, based on data collected as of Jan. 9. The Beige Book reports on 12 districts categorized by cities and represented by Federal Reserve Banks. 

The monthly report offers a regionalized view of the challenges of the current economic conditions. 

While supply chain challenges are improving, continued restrictions are driving up prices and contributing to mixed results across different sectors. 

The Richmond Fed, which serves Maryland, Virginia, North Carolina, South Carolina, most of West Virginia, and the District of Columbia, reported that new tractors and trailers were back-ordered about six months, contributing to higher prices. 

Costs related to transportation and materials remained elevated even as supply bottlenecks improved in the region served by the San Francisco Fed, which covers Alaska, Arizona, California, Hawaii, Idaho, Nevada, Oregon, Utah, Washington, American Samoa, Guam, and the Northern Mariana Islands.  

In the New York Fed’s region, covering New York; Fairfield County in Connecticut; 12 counties in northern New Jersey; Puerto Rico; and the U.S. Virgin Islands, businesses indicated that supply disruptions had eased, although optimism was mixed.  

“Looking ahead, manufacturers do not expect much improvement, while transportation, warehousing, and wholesale trade firms were more optimistic,” according to Beige Book. 

Overall, supply chain disruptions of varying degrees were recorded across 39 states and Washington, D.C. 

Commercial lending demand slows 

Meanwhile, higher borrowing costs driven by elevated interest rates are limiting commercial lending demand.  

Commercial lending declined in the regions served by the Cleveland Fed, Dallas Fed and Richmond Fed, collectively covering 11 states. The Kansas City Fed, Philadelphia Fed and St. Louis Fed – which together cover 17 states – by contrast saw an uptick in commercial loan volume. 

Despite high interest rates, delinquencies remained low in the St. Louis Fed’s region, indicating healthy credit quality.