WASHINGTON (MNI) – The following is the Beige Book report on
economic activity by the New York Federal Reserve Bank, published
Wednesday:

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.

Consumer Spending

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.

Financial Developments

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.

** Market News International Washington Bureau: 202-371-2121 **

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