Economic Environment

The U.S. economy continued to expand at a strong pace of 2.9% in 2018 from 2.2% in 2017 as private consumption,
investment spending, net exports, and government spending all rose at a faster pace.

Bar graph: GDP Growth, 2000 to 2018

The unemployment rate continued to trend down to 3.9%, while inflation mildly rose to 2.4%.

Line graph: Unemployment and Inflation Rates, 2000 to 2018

Amid the solid economic growth and job creation and the slight uptick in inflation, the U.S. Federal Operations Market Committee raised the benchmark federal funds rate target four times in 2018 by a total of 1 percentage point, to a range of 2.25 to 2.5% at the end of 2018. The average bank prime loan rate rose to 4.9% in 2018, from 4.1% in 2017.

Line graph: Average Bank Prime Loan Rate, 2000 to 2018

The 2019 survey on commercial lending takes place in an economic environment marked by slightly higher interest rates and a lower level of bank reserves held by depository institutions that underpin the level of lending.

  • 56% of respondents reported an increase in net operating income in 2018, a decrease from 65% in the previous year’s survey.
  • 38% of respondents reported tighter lending conditions in 2018, up from 35% in 2017, with a higher fraction for retail stores.
  • 65% of respondents reported the client used debt financing to purchase a property, with higher reliance on debt financing for suburban offices and retail malls.
  • 5% to 7% was the average interest rate on loans.

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