WASHINGTON (MNI) – The following is the Beige Book section on the
Federal Reserve’s Second District, published Wednesday:
SECOND DISTRICT – NEW YORK
The Second District’s economy continued to expand at a modest pace
since the last report. Input prices have risen somewhat, while consumer
prices remain steady. General merchandise retailers report that sales
were mixed but, on balance, steady and close to plan; auto dealers in
upstate New York report that sales held up fairly well in August and
September and that credit conditions continued to improve. Commercial
real estate markets have generally been steady since the last report.
Residential real estate sales markets were generally stable across the
District, while New York City’s rental market showed continued modest
improvement. Manufacturing-sector contacts report some pickup in
business during September and early October, after a pause in August.
Tourism activity in New York City, though still fairly brisk, has shown
some signs of cooling since the last report. The labor market has been
mixed recently: manufacturers continue to add jobs and firms in a wide
variety of industries plan to increase employment in the months ahead;
however, contacts in New York City report that the financial industry
continues to shed jobs and that hiring for office and administrative
jobs generally remains sluggish. Finally, bankers report little change
in loan demand, lower delinquency rates on consumer loans, and ongoing
tightening in credit standards.
Consumer Spending
General merchandise retailers report that sales have been mixed
since the last report, with same store sales running roughly on par with
a year ago and on or close to plan in September. Stores in Manhattan
fared somewhat better than in the rest of the region, evidently helped
by brisk tourism. One major retail chain notes that sales of seasonal
apparel were sluggish due to unseasonably mild weather but that sales in
most other categories were fairly good; this contact expects holiday
season sales to be up roughly 3 percent from 2009 on a same-store basis.
Another contact at a major mall in upstate New York indicates a sharp
uptick in sales toward the end of September. Some New York State
retailers express concern about the recent reinstatement of the state
sales tax on clothing under $110, though it is too early to gauge any
effect on sales. Inventories are generally reported to be at favorable
levels, while prices remain steady; merchandise acquisition costs have
also been steady. A few major retail contacts indicate that they plan to
hire more holiday-season staff than in 2009. Auto dealers in upstate New
York report that sales of new vehicles held up fairly well in August and
September, though the cash-for-clunkers program last summer adversely
affected year-ago comparisons. Sales and prices of used cars have
reportedly been buoyed somewhat by strong demand and lean inventories of
new vehicles. Auto dealers report continued improvement in credit
conditions.
Tourism activity in New York City, though still fairly brisk, has
shown some signs of cooling since the last report. Manhattan hotels
report that occupancy rates remained close to 90 percent in September,
while room rates continued to run 10-15 percent ahead of a year earlier.
However, there are scattered reports of weaker than expected advance
bookings for October, which may reflect some softening in business
travel. Broadway theaters report that revenue weakened noticeably in
September and was down roughly 10 percent from a year earlier; this
reflects some recent tapering off in both attendance and ticket prices,
the latter of which was down roughly 6 percent from a year earlier.
Separately, consumer confidence remained steady in September,
though at depressed levels. The Conference Board reports that confidence
among residents of the Middle Atlantic region (NY, NJ, PA) edged up in
September, after falling to a more than one-year low in August; Siena
College’s September survey of New York State residents shows confidence
holding steady in both upstate and downstate-also at weak levels.
Construction and Real Estate
Housing markets have been mixed but generally stable since the last
report. Real estate contacts in both northern New Jersey and western New
York State report that sales activity has remained exceptionally weak as
the usual seasonal pickup in September has not occurred. The ongoing
weakness was partly attributed to the expiration of the home-buyers tax
credit, which is believed to have pulled sales forward from the second
half of 2010. Prices are characterized as relatively stable in upstate
New York and drifting down in northern New Jersey, where one industry
contact notes a sizable inventory of distressed properties on the
market. Manhattan’s co-op and condo market was stable in the third
quarter: sales activity was steady, after accounting for a normal
seasonal dip, and prices were steady to down slightly overall.
Manhattan’s apartment rental market improved modestly: effective rents
are estimated to be rising moderately, as landlords pull back on
concessions. New leasing activity picked up noticeably in the
quarter-largely attributed to renters moving in response to the end of
concessions on lease renewals.
Office markets across the District softened modestly since the last
report. Asking rents continued to drift down in Manhattan and northern
New Jersey but were mostly steady in other parts of the region. In
Manhattan, office vacancy rates retreated in August and September, after
rising in July. In most of the District, though, vacancy rates have
edged up since the last report.
Other Business Activity
A major New York City employment agency, specializing in office and
administrative jobs, reports that hiring activity was disappointingly
sluggish in September-particularly from financial firms. Similarly, a
contact in the financial industry notes that employment continues to
drift down, as the pace of layoffs appears to have picked up a bit
lately; some financial firms are reported to be in the market for
lawyers and accountants but are not hiring much in other areas.
Moreover, recent weakening in revenues is said to be constraining
compensation at these firms, and year-end bonuses (typically paid out in
January) are projected to be lower than this past year.
Manufacturing firms in the District report a pickup in activity in
September, following a pause in July and August, and a growing
proportion of manufacturing contacts indicate that they are increasing
employment and plan to add more workers in the months ahead.
Non-manufacturing contacts also report some pickup in business activity
and have grown substantially more optimistic about the general business
outlook. Both manufacturers and other firms report a moderate increase
in input price pressures but only modest changes in selling prices.
Financial Developments
Small to medium-sized banks report that loan demand was generally
steady overall: respondents indicate a moderate decrease in demand for
consumer loans and commercial and industrial loans, but a moderate
increase in demand for residential mortgages; demand for commercial
mortgages was little changed. Bankers also note a continued increase in
refinancing activity. Credit standards are reported to have tightened
for commercial and industrial loans and mortgages, with no reports of
easing standards in these categories; however, banks report little or no
change in credit standards for consumer loans and residential mortgages.
Bankers’ responses suggest some decrease in spreads of loan rates over
costs of funds for residential mortgages but no change in spreads in the
other loan categories. Respondents indicate ongoing widespread decreases
in the average deposit rate. Finally, bankers report a decrease in
delinquency rates for consumer loans but little or no change for other
loan categories. Separately, contacts at credit unions indicate that
credit conditions and business activity generally remain steady.
** Market News International Washington Bureau: 202-371-2121 **
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