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.
SECOND DISTRICT--NEW YORK
The Second District’s economy has continued to grow slowly since the last report, while the labor market has generally been stable. Manufacturers report that general business conditions and employment levels have been steady in recent weeks but that they plan to add workers in the months ahead. Consumer spending has continued to expand at a moderate pace: auto dealers report that sales were steady to stronger in October, non-auto retail contacts report that sales have been on or ahead of plan, and tourism activity has been generally robust. Home sales and prices have generally held steady since the last report, though rental markets continued to strengthen. Commercial real estate markets have shown slight signs of softening. New York City financial firms continue to face adverse business conditions and have announced impending layoffs. Finally, bankers report a pickup in demand for commercial mortgage loans, continued tightening in credit standards, and lower delinquency rates on commercial and industrial loans.
Non-auto retailers report that same store sales were mostly on or ahead of plan in October and the first half of November but little changed from a year earlier. Contacts at major malls in upstate New York indicate that sales activity was mixed in October but appeared to improve in the early part of November. One large retail chain indicates that sales in the region were down slightly from a year earlier in October and early November but still somewhat ahead of plan. Retail inventories are generally said to be at desired levels, while prices are reported to be flat to down slightly. Auto dealers in upstate New York report that sales were steady to stronger in October and that dealers’ service and parts departments continue to perform well.
Consumer confidence has weakened noticeably since the last report. Both Siena College’s October survey of New York State residents and the Conference Board’s survey covering the Middle Atlantic states (NY, NJ, PA) show consumer confidence falling to its lowest level in more than a year. Tourism activity has been generally robust since the last report. Albany-area hotels report strong improvement in occupancy rates in September. New York City hotels report that occupancy rates were steady at about 90 percent in September and October--up modestly from 2010 levels; room rates were up roughly 4 percent from a year earlier in October and total revenues were up about 6 percent. However, Broadway theaters report that attendance fell 5-10 percent below year ago levels in October and early November--in part reflecting fewer shows open this year. Still, total revenues have continued to run ahead of 2010 levels, reflecting double-digit percentage increases in revenues per show.
Construction and Real Estate
Residential real estate markets have been stable, on balance, since the last report, while home construction activity remains low--particularly for single-family homes. New York City’s rental market continues to strengthen: asking rents remained on an upward trend up in October and were up 5 to 10 percent from comparable 2010 levels. Scattered reports from elsewhere in the District also point to strengthening rental markets. Co-op and condo prices in Manhattan and Brooklyn were mostly steady since the last report, while transactions activity dipped in October but turned up in early November. In northern New Jersey, home prices are reported to be down modestly, hampered by a glut of distressed properties; while fewer home mortgages are moving into delinquency status recently, there remains a large overhang of distressed properties. New home construction remains at a low level, with multi-family rental buildings accounting for most new development--in both New York City and northern New Jersey. Buffalo-area Realtors report steady home sales activity but some downward drift in prices; they also note a pickup in traffic at open houses.
Commercial real estate markets have been steady to slightly weaker since the last report. Office vacancy rates in both midtown and downtown Manhattan ticked up in October; the average asking rent continued to climb, but this is attributed to the fact that much of the space recently coming on the market is in high-priced buildings. A contact in western New York State reports that commercial leasing activity remains flat, while commercial construction activity has picked up slightly but remains sluggish; credit availability continues to be a restraining factor for the market.
Other Business Activity
According to an industry contact, financial sector conditions remain adverse, with several thousand layoffs reportedly in the pipeline in the New York City area. This contact notes that regulatory uncertainty is hampering planning and causing shifts in resources among areas. While securities firms are reducing headcounts overall, they are still hiring in the legal and compliance areas. A major New York City employment agency reports that the job market has held steady since the last report with hiring activity described as moderate in October. Starting salaries have remained stable over the past year.
Both manufacturers and service-sector firms continue to report stable employment levels but indicate plans to increase headcounts, on balance, over the next six months. Manufacturing firms across New York State report that general business conditions have held steady over the past month, and they express increased optimism about the near term outlook. Non- manufacturing contacts are also increasingly optimistic about the near-term outlook, though less so than manufacturers.
Small to medium-sized banks in the District report increased demand for commercial mortgages but no change in demand in other loan categories. Bankers also reported an increase in the demand for refinancing. Respondents report tightening credit standards in all categories except residential mortgages, for which they indicate no change. Tightening of standards was most prevalent for commercial mortgages. Contacts report decreases in spreads of loan rates over costs of funds for all loan categories. Respondents also indicate widespread decreases in average deposit rates. Bankers report declining delinquency rates for commercial and industrial loans, but no change in delinquencies for the other loan categories.