U.S. Federal Reserve Beige Book: New York District (Text)undefined
The following is the text of the Federal Reserve Board’s Second District-- New York.
SECOND DISTRICT - NEW YORK
Economic growth in the Second District has continued at a moderate pace since the last report. Contacts indicate some increase in cost pressures, though selling prices continue to be steady to up slightly. Labor market conditions have shown further signs of improvement, and there are scattered reports of wage pressures. General merchandise retailers indicate that sales were generally steady in September and close to plan, while new auto sales have been increasingly robust. Tourism activity has shown some signs of picking up since the last report. Commercial and especially residential real estate markets have shown signs of firming. In contrast, contacts in the manufacturing sector report a pause in growth, and the climate in the financial sector is described as downbeat. Bankers report softer loan demand from the household sector, no change in credit standards, little change in loan spreads, and continued widespread declines in delinquency rates. More broadly, some contacts express concern about potential disruptive effects of a prolonged federal government shutdown.
Retailers report that sales have been generally steady and close to plan since the last report. A major retail chain reports that sales were on plan in both August and September, with New York City stores continuing to out-perform the rest of the region. One major mall in upstate New York notes that sales picked up somewhat in September whereas another upstate mall indicates that sales have been steady and roughly on par with 2012 levels. Inventories are generally characterized as on plan. Prices are generally described as somewhat more promotional than a year ago.
Buffalo area auto dealers report that new vehicle sales were steady and strong in August, running 13 percent ahead of a year ago, while Rochester-area dealers report that sales accelerated and were up more than 20 percent. While final numbers are not yet tallied, sales are reported to have remained robust in September. Sales of used automobiles have generally been soft. Wholesale and retail credit conditions for auto purchases continue to be characterized as favorable.
Tourism activity has shown increasing strength since the last report. Manhattan hotels report that revenues were up 5-6 percent from a year earlier in September, following gains of 3-4 percent in both July and August. Occupancy rates remain above 90 percent--up nearly 2 percentage points from comparable 2012 levels--while room rates are up roughly 3 percent. Based on bookings, October looks to be strong as well. Attendance at Broadway theaters picked up noticeably in August and especially in September. After running below 2012 levels for most of this year, attendance was up 5-6 percent from a year ago in September, and total revenues were up 10 percent--in part reflecting some new shows opening.
Finally, consumer confidence in the region has improved since the last report. The Conference Board’s survey of residents of the Middle Atlantic states (NY, NJ, Pa) shows confidence surging to a nearly six year high in September, while Siena College’s survey of New York State residents points to a more moderate increase.
Construction and Real Estate
Residential real estate markets in the District have been steady to stronger since the last report. Buffalo-area contacts continue to describe market conditions as robust in both August and September, with brisk sales volume, moderately rising prices, and continued reports of bidding wars. Sales activity in New York City’s co-op and condo market was exceptionally brisk in the third quarter--the highest since 2007 and the 2nd highest in 24 years. Sales of smaller (one bedroom) apartments were particularly strong. The inventory of available apartments for sale has fallen to new lows, as completed transactions are outnumbering the flow of new listings. Whereas Manhattan prices have risen only modestly, prices for Brooklyn apartments are reported to be up 10-15 percent over the past year. New York City’s rental market has been mixed: while Manhattan rents have stopped rising and are down slightly from a year ago, Brooklyn rents have been rising at a more than 10 percent pace.
A contact in New Jersey’s housing industry reports continued gradual improvement in market conditions. Prices continue to rise modestly, held back by a persistent overhang of distressed properties. The Jersey shore sales market remains tepid, with prices still well below their pre-recession peaks-- particularly in areas hard hit by Sandy last October.
Office markets were steady to stronger in the third quarter. Manhattan’s vacancy rate declined to 7.3 percent--its lowest level in more than four years--while asking rents continued to rise, particularly on Class B properties. Long Island’s office vacancy rate also edged down below 8 percent, though asking rents were little changed. In the northern New Jersey and Westchester/ Fairfield markets, however, vacancy rates were unchanged at much higher levels, while asking rents were little changed. A New Jersey real estate contact maintains that non-residential construction activity is almost strictly limited to renovations and improvements on existing properties.
Other Business Activity
On balance, the labor market has shown further signs of improving. One major employment agency reports broad-based strength in hiring activity and notes increasing difficulty finding qualified job candidates; more job-seekers are reportedly getting multiple offers and there are now scattered reports of salaries being bid up. Another contact, however, reports more modest improvement and characterizes wage offers as stable. Both contacts report particularly strong demand for IT workers. One employment agency notes that the government shutdown has hampered efforts to do background checks on prospective employees, whereas another contact indicates this has not been problematic thus far.
A contact in the finance sector characterizes the current business climate as gloomy--hiring has reportedly been mixed, with much of the demand focused on people in legal and compliance fields. Manufacturing firms in the District report some slowing in hiring activity, along with a pause in growth more generally; these contacts are also less optimistic about the near-term outlook. However, nonmanufacturing firms generally indicate that both business and hiring activity have increased modestly since the last report, though these contacts have also become a bit less optimistic about the near term outlook and also in their net hiring plans. Both manufacturers and other firms report some pickup in input price pressures but little change in their selling prices.
Bankers reported weakening demand for consumer loans and especially in residential mortgages but increased demand for commercial mortgages. Demand for mortgage refinancing also continued to decrease. Respondents reported no change in demand for commercial & industrial loans. Credit standards were unchanged across all loan categories. Respondents indicated a narrowing in spreads of loan rates over costs of funds for commercial loans and mortgages but no change in spreads for consumer loans and residential mortgages. Finally, bankers report further widespread declines in delinquency rates for all loan categories.
SOURCE: Federal Reserve Board