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Weemba ARTICLES

  • 01/31/2012 | 6:15 pm
  • by: Weemba

Fed Says Business-Loan Demand Climbed Last Quarter as Economy Accelerated

Demand for business loans increased in the fourth quarter as economic growth accelerated, according to a Federal Reserve survey of senior loan officers at banks.

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By Joshua Zumbrun, Jan. 30, 2012 on Bloomberg.com

Seventeen of 56 banks reported stronger demand among companies with $50 million in annual sales or more, according to the survey released today in Washington, while six reported weaker demand. Demand among small businesses for loans increased by the most in any quarter since 2005.

Economic growth accelerated last quarter to a 2.8 percent annual rate, the fastest pace since the second quarter of 2010. The expansion still isn’t strong enough to push down an unemployment rate that has been at 8.5 percent or higher for 34 consecutive months, prompting the Fed last week to say its benchmark interest rate will be kept near zero until at least the end of 2014.

While business demand for borrowing increased, banks reported “little change in standards on commercial and industrial loans but a continued easing of pricing terms,” the survey said. The pickup in business lending was a reversal of the previous survey, released in November, in which more banks reported a drop than an increase in demand.

Banks and businesses may be “moving away from the ‘buckle down’ approach,” said Drew Matus, senior economist at UBS Securities LLC in Stamford, Connecticut.

“If a firm wants to expand they typically need to borrow money to do it,” Matus said. “So at a minimum this suggests we should still be looking for decent job growth over the next three to six months.”

Read the rest of this story and more analysis of the report at Bloomberg.com

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