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
Growth in the Second District’s economy has picked up somewhat since the last report. Labor market conditions have been stable to slightly stronger in recent weeks, and a sizable number of contacts say they plan to add workers in the months ahead. While consumer prices generally remain steady, business contacts in a number of industries indicate rising cost pressures. Manufacturers report steady improvement in business conditions. Most retailers and auto dealers describe sales as steady but strong in February and the first few weeks of March. Tourism activity has been mixed but generally strong since the last report, with bookings for the months ahead described as robust. Home sales activity has continued to strengthen since the last report, though prices have been steady to somewhat lower; rental markets have continued to improve, and there has been a pickup in rental multi-family construction. Commercial real estate markets remained steady in the first quarter of 2012. Finally, bankers report increased loan demand, no change in credit standards, and the most widespread declines in delinquency rates in a number of years.
Retailers report that sales were mixed but mostly steady and strong in February and the first few weeks of March. One major retail chain reports that sales were above plan and running more than 5 percent ahead of year earlier in both February and March, led by strength in spring apparel and accessories. Retail contacts in upstate New York report that sales in recent weeks have been strong and running roughly on par with a year earlier, which was also characterized as a very strong period, with continued strong demand from Canadian shoppers. However, another major retailer indicates that same-store sales were below plan and down considerably from 2011 levels. Retail prices continue to be mostly stable, but one major chain notes declining costs for apparel merchandise. Inventories are generally reported to be at desired levels.
Auto dealers in upstate New York report that sales activity picked up in February and has remained strong in the first few weeks of March. Sales of new vehicles were up 4-7 percent from a year earlier in February and remained fairly strong in March. Inventory stock-outs are no longer a factor holding down sales. Business generally remains brisk at dealer service departments, although dealers in the Buffalo area report that unseasonably mild weather has reduced demand for winter-oriented service. Wholesale and retail credit conditions remain favorable.
The Conference Board’s latest survey of residents of the Middle Atlantic states (NY, NJ, PA) shows confidence slipping moderately in March, though it remains well above its lows of last October. Tourism activity has been fairly robust since the last report, and hotel bookings for upcoming months look strong as well. Albany area hotels report rising occupancy rates in February. New York City hotels report that total revenues per room were up roughly 6 percent from a year ago in February and March, with particular strength in the last couple of weeks. All of the increase reflects higher occupancy rates, as room rates have leveled off. Moreover, an industry contact notes that advance bookings are very strong and that room rates are poised to rise. Attendance at Broadway theaters was fairly robust in February but has tapered off in March, largely because fewer shows are running than at this time last year; however, revenues continue to run ahead of 2011 levels, reflecting a substantial rise in ticket prices.
Construction and Real Estate
Housing markets across much of the District appear to have picked up since the last report, while rental markets continue to firm. Home sales are reported to be on the upswing in northern New Jersey, though prices are steady to declining, largely due to more distressed properties coming to market. One industry expert notes surprising strength in new multi-family construction in New Jersey--almost entirely rental units--thus far in 2012; this segment now accounts for well over 50 percent of all new homebuilding, which is said to be unprecedented. Apartment rental markets in both New York City and northern New Jersey continue to firm, with inventories tight and rents rising steadily. A major New York City appraisal firm notes that Manhattan’s co-op and condo market has firmed since mid- February: while prices remain flat, sales have picked up-- especially for studio and 1-bedroom co-ops--and new contract activity is estimated to be running 7 percent ahead of a year earlier. Conditions in the outer boroughs have been somewhat softer. Real estate contacts in western New York State report continued gradual improvement in home sales activity but note some downward pressure on prices.
Commercial real estate markets have been mixed but, on balance, steady since the last report. Office vacancy rates in New York City and on Long Island declined in the first quarter, while rents have risen moderately. By contrast, office markets have slackened in northern New Jersey, Westchester and Fairfield counties, and in Rochester. Most other metro areas in upstate New York have seen steady to slightly declining vacancy rates. Industrial markets across the District have been fairly stable.
Other Business Activity
A major New York City employment agency specializing in office jobs reports that hiring activity has held steady since the last report. Legal hiring has picked up somewhat but for specific positions with specialized qualifications, while finance-sector hiring remains modest. More broadly, though, a sizable number of manufacturers and a growing number of business contacts in other sectors say that they plan to step up hiring activity in the months ahead.
Looking at business conditions more generally, manufacturers across New York State report continued improvement since the last report, while a growing proportion of non-manufacturing contacts report increases in business activity. Business contacts in both manufacturing and other sectors report that input costs are rising; however, selling prices are reported to be holding steady, on balance.
Small to medium-sized banks in the District report increased loan demand in all categories, but particularly for commercial mortgages. Bankers indicate increased demand for refinancing but to a less widespread degree than in recent months. Credit standards are reported to be little changed across all loan categories. Respondents note a decrease in spreads of loan rates over the cost of funds for all loan categories--particularly for commercial and industrial loans where well over two in five bankers report lower spreads, while none report higher spreads. Respondents also indicate some decline in average deposit rates. Finally, bankers report decreases in delinquency rates for all loan categories. Moreover, the reported decreases are more widespread among our banking contacts than at any time since the late 1990s.