Banking conditions/'Spending fatigue'/Retail comments/Other notable stuff

Yesterday we got the February Dallas Fed's Banking Conditions Survey and here was the summary:

"Loan volumes remained stable, with near-equal shares of bankers reporting an increase over the past six weeks as those reporting a decrease. While residential real estate loan volumes have been declining notably over the past six months, those declines abated in the latest survey. The pace of credit tightening continued to slow, particularly for commercial real estate and commercial and industrial loans. Loan demand continued to decline. Loan nonperformance and loan pricing rose but at a more moderate pace. Looking ahead, bankers’ outlooks are mixed: they expect stronger loan demand six months from now and more tempered declines in loan performance but further deterioration in overall business activity."

Understand that when the 'pace of credit tightening continued to slow', it does not mean that its gotten easier, it just means that there wasn't a further tightening from what was already tight. The optimism for a pick up in loan demand in the coming six months is predicated on expected Fed rate cuts. One respondent said "The timing of the projected Federal Reserve pivot is majorly impacting business activity" and from another, "The discussion about a stabilization of interest rates with possible rate decreases down the line has improved the business community's outlook for 2024."

Here were some other respondent comments of note:

"We are beginning to see an increase in nonperforming consumer loans."

"Overnight borrowing is a big concern. Deposit rates need to drop."

"We are now seeing consumers losing jobs and not being able to find new ones."

"The decreasing values of vehicles securing auto loans [will be a problem, leading to] potential losses due to defaults and resulting deficit balances.

"Competition for deposits is still present in the marketplace but at a more managed pace than in 2023. The increase in regulatory commentary outside of the traditional rulemaking process has added an additional layer of uncertainty to the planning process. Overall economic factors are reasonably good except for credit stress in some areas of the member base, with unsecured consumer loans experiencing the most meaningful impact."

The rise in mortgage rates put a halt to mortgage applications. Purchases fell 10.1% w/o/w and refi's were lower by 11.4% w/o/w.