WASHINGTON (MNI) – The following is the second part of the latest
Beige Book survey of economic conditions in the Federal Reserve’s Fourth
District, published Wednesday:

Banking

Demand for business loans showed a moderate improvement, with
requests being driven mainly by commercial real estate, manufacturing,
and healthcare. Reports indicated downward pressure on interest rates
for commercial credit. On the consumer side, bankers reported that
applications for home equity lines of credit have declined, and they
characterized installment loan activity as flat or down. However, direct
and indirect auto lending continued to show strength. Applications for
refinancing residential mortgages have picked up due to lower interest
rates, with little activity in new purchases. No changes were made to
loan application standards. Since our last report, many of our contacts
have experienced substantial growth in core deposits from consumers and
businesses. Delinquencies were mainly steady or declined across loan
categories. Payrolls were stable, with only very selective hiring
expected for the remainder of the year.

Energy

Conventional oil and natural gas drilling and production were
fairly stable during the past six weeks, while activity in Marcellus and
Utica shales expanded. A few producers expect output from conventional
wells to increase in the upcoming months. Wellhead prices paid to
independent producers remain on a downward trend. Little change in coal
output is anticipated for the remainder of this year and into 2012. Spot
prices for coal increased slightly. Capital outlays are on target, with
moderate increases projected by oil and gas companies in the upcoming
months for drilling new wells. The cost of production equipment and
materials was flat during the past six weeks. Energy payrolls held
steady.

Transportation

Overall, freight transport volume continued on a slight upward
trend, with increases seen in consumer products, including furniture.
Most of our contacts expect volume to grow at a slow, steady pace in the
near term. Although diesel fuel prices have moderated, a few contacts
noted that their companies still have a fuel surcharge in place. Truck
maintenance costs continued to rise. Two of our respondents have
successfully increased their shipping rates as customer contracts came
up for renewal. Capital outlays have accelerated during 2011 relative to
prior-year levels. Spending is mainly to replace aging equipment and to
support demand growth from energy customers. One executive noted that
newer engines and class 8 trucks are increasing in price, and that it is
becoming more difficult to secure financing. Hiring has been largely for
driver replacement; however, we heard a couple of reports about carriers
adding capacity. Wage pressures are emerging due to a tightening of the
driver pool.

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: M$U$$$,MMUFE$,MGU$$$,MFU$$$]