U.S. Federal Reserve Beige Book: New York District (Text)
The following is the text of the Federal Reserve Board’s Second District -- New York.
The Second District’s economy has continued to expand since the last report, with noticeable improvement in the labor market, while prices have remained stable. Non-manufacturing contacts overall report steadily improving business conditions, whereas manufacturing-sector contacts report a recent pullback in activity; even so, respondents in both sectors indicate that they continue to add workers, on balance, and plan to do so in the months ahead. Similarly, a major employment agency notes some pickup in hiring activity. General merchandise retailers report that sales have improved steadily in October and early November, while auto dealers continue to report fairly good sales results. Tourism activity in New York City has shown signs of picking up in recent weeks. Consumer confidence has also moved up modestly. However, commercial and residential real estate markets have been steady to softer since the last report. Finally, bankers report steady loan demand, tightening credit standards, and some increase in delinquency rates on home mortgage loans. Consumer Spending
Retailers report that sales have picked up steadily since September: overall, sales were characterized as roughly on plan in October and ahead of plan through early November. One major retail chain attributed part of the recent pickup in sales to the arrival of cold weather in November, after an unseasonably mild October. A large mall in western New York State reports that traffic has been brisk and that customers -- particularly from Canada -- have been leaving with many shopping bags. A contact at another major mall in upstate New York notes that sales slowed in October and were down slightly from a year earlier but picked up in the first half of November. Most retail contacts in New York state indicate little, if any, discernible effect from the October 1st reinstatement of the sales tax on clothing priced under $110. Inventories are generally reported to be at favorable levels, and prices continue to be steady, though one large chain anticipates some increase in merchandise price pressures starting next spring. Most retail contacts indicate that they are hiring slightly more holiday-season workers than in 2009; one contact notes that there have been more applicants for these temporary jobs this year. Auto dealers in the Rochester area report that sales of new autos were up roughly 12 percent from a year ago in October and are running 5 to 10 percent ahead in November. Low inventories are no longer a problem, because auto production has recovered to a more normal level. Retail credit conditions have continued to ease, and wholesale credit markets have shown steady improvement.
Tourism activity in New York City has been strong since the last report. Manhattan hotels report that occupancy rates continued to hover around 90 percent in October and remained higher than a year ago in November; room rates continued to edge up since the last report and were running 7 to 8 percent ahead of a year ago. While leisure visits to New York City are described as steady and robust, business travel has strengthened steadily. Broadway theaters report a pickup in both attendance and total revenues in late October and early November: after a dip in September and early October, business is, once again, running ahead of a year earlier.
Consumer confidence, though still at low levels, has improved modestly since the last report. The Conference Board reports that consumer confidence among residents of the Middle Atlantic states (NY, NJ, PA) rose in September and October, reversing a decline in August. Similarly, Siena College’s latest survey of New York State residents shows confidence rising to its highest level since May both upstate and in the New York City area.
Construction and Real Estate
Housing markets across the District have been steady to softer since the last report, with some of the ongoing weakness at the lower end of the market attributed to the mid-year expiration of the home-buyer tax credit. In general, prices have drifted down across much of upstate New York and in northern New Jersey since mid- year, while prices in New York City remained relatively steady. Buffalo-area Realtors report that the housing market weakened somewhat in October through early November, particularly for lower-priced homes; sales activity has slowed, and the supply of homes on the market has increased. Similarly, a contact in northern New Jersey reports that market conditions remain sluggish: sales activity remains low and is still largely composed of distress sales, and prices are still said to be edging down.
Activity in New York City’s co-op and condo market has slipped by a bit more than the seasonal norm in October and early November, particularly at the lower end of the market, though a recent flurry of activity is reported at the very high end (homes in the range of $8 million or more). Prices remain stable across the spectrum. While the number of new condos under construction has declined modestly, there continues to be a substantial inventory of unsold, completed units. Manhattan’s rental market has reportedly softened a bit since the last report. Rents remain stable, but landlords are, once again, offering concessions (such as one or more month’s free rent), though these discounts are not as steep as in 2009. A substantial amount of new housing in the pipeline is likely to be offered as rentals.
Office markets across the District have been steady to slightly softer thus far in the fourth quarter. Asking rents held steady in Manhattan and slipped in northern New Jersey, Long Island and Rochester but rose modestly in Westchester and Fairfield counties and in Buffalo. Vacancy rates have been steady to modestly higher since the last report. Sales of commercial properties remain sluggish, and a contact in upstate New York reports that commercial construction activity remains at depressed levels.
Other Business Activity
A major New York City employment agency, specializing in office jobs, reports that the job market has picked up a bit since the last report, with some increase in hiring activity at both financial and legal firms; other areas, such as publishing remain sluggish. The pool of job applicants, though still large, appears to be shrinking a bit. More broadly, non-manufacturing firms in the District report increasingly widespread hiring activity, as well as business conditions generally; these contacts also remain optimistic about prospects for the early part of 2011.
On the other hand, manufacturing activity has weakened, on balance, as a number of firms saw slower activity and fewer contacts reported improvements. Yet these contacts continue to report that they are increasing employment, on balance, and they are increasingly optimistic about the near-term outlook. Also, manufacturing contacts indicate that they are currently holding somewhat higher cash balances than usual, and a sizable proportion of contacts indicate that they plan to increase cash holdings over the next year. Both manufacturers and other firms report moderate increases in prices paid but little or no change in their selling prices.
Small to medium-sized banks in the District report steady loan demand across all categories, although they see some increase in the demand for refinancing. Respondents report a tightening of credit standards for all loan categories: the percentage of bankers reporting tightening credit standards ranged from 11 percent for residential mortgages to 18 percent for commercial and industrial loans. No banker reported an easing of credit standards in any of the categories. Bankers report narrowing spreads of loan rates over costs of funds for all loan categories - - most notably in the commercial and industrial loan category. Respondents also indicate widespread decreases in the average deposit rate. Finally, bankers report rising delinquency rates for residential mortgages but little or no change in other categories.
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