WASHINGTON (MNI) – The following is the latest Beige Book survey of
economic conditions in the Federal Reserve’s Second District,
published Wednesday:
SECOND DISTRICT-NEW YORK
The pace of activity in the Second Districts economy slowed
somewhat since the last report. Business contacts across a variety of
sectors indicate that activity has flattened out in recent weeks and
that hiring has tapered off. Retail sales remained fairly sturdy in June
but were mixed in early July. Consumer confidence has remained at low
levels. Tourism activity has remained strong. Commercial real estate
markets have been mixed since the last report, with office markets
mostly stable but industrial markets weakening somewhat. The residential
purchase market has been steady to somewhat softer, while the rental
market has shown further signs of strengthening; there continues to be
little new home construction. Finally, bankers report increased demand
for commercial & industrial loans, lower delinquency rates on such
loans, and no change in credit standards in any category.
Consumer Spending
Non-auto retail sales continued to run on or above plan in June,
with same-store sales running 1 to 5 percent ahead of a year earlier,
though reports for early July were more mixed. A number of contacts note
that sales of apparel have been performing relatively well, while sales
of home goods have been on the sluggish side; one contact notes that
fashion apparel has been selling considerably better than more basic
items. One large chain reports somewhat stronger sales in its New York
City stores than elsewhere in the region; part of this is attributed to
tourism. Moreover, one large retail mall in western New York State notes
that a continued brisk flow of Canadian shoppers has been a major factor
in driving sales. Retail inventories are generally reported to be in
good shape. Prices appear to be relatively stable overall: one retail
chain indicates that it has raised prices moderately on some lines, but
another contact notes that there is somewhat more discounting of
merchandise than at this time last year. Sharply higher cotton prices
are expected to push up clothing prices moderately in the second half of
the year.
Auto dealers in upstate New York report that sales were mixed in
June. Rochester-area dealers note some deceleration in sales, mainly
attributed to low inventories or stock-outs due to ongoing Japan-related
disruptions. On the other hand, Buffalo-area dealers indicate some
pickup in sales in June, after a sluggish May, as inventory problems
begin to subside. Used cars are said to be selling well. Auto-industry
contacts note improvement in both retail and wholesale credit
conditions. Consumer confidence surveys continue to give mixed results.
Siena College reports that consumer confidence among NY State residents
slipped in June, following a good gain in May, with declines occurring
both upstate and downstate. In contrast, the Conference Board reports
that consumer confidence among residents of the Middle Atlantic states
(NY, NJ, Pa) rose in June, following a steep drop in May. Still, both
surveys show confidence mired at low levels. Tourism activity in New
York City has remained quite strong since the last report, as reflected
in persistently high hotel occupancy rates, room rates that run 6 to 8
percent ahead of a year earlier, and a pickup in Broadway theatre
attendance and revenues.
Construction and Real Estate
Residential construction has remained depressed and housing markets
across the District have remained sluggish since the last report,
although there has been further improvement in the rental market. An
authority on New Jerseys housing industry reports that the resale
market has remained weak, and that the level of optimism appears to have
waned. Prices of existing homes have continued to drift down, largely
reflecting a preponderance of distressed sales; otherwise, prices
across northern New Jersey are generally flat. While the inventory of
unsold new homes is fairly lean now, the inventory of available existing
homes remains elevatedas high as 16 months of sales if units in
foreclosure and other distressed properties are included. Buffalo-area
Realtors also report some weakening in market conditions in May and
June; while foot traffic has been fairly brisk, few people have made
offers. More generally, sales activity across New York State has been
steady to weaker. A major New York City appraisal firm reports that both
sales and prices of co-ops, condos, and single-family homes remain flat
overallboth in Manhattan and in the outer boroughswith the high end of
the market accounting for a larger share of sales than last year.
In contrast with the weakness in home purchase markets, rental
markets have shown increasing strength. Manhattans apartment rental
market has strengthened since the last report. Rents on new leases were
reported to be up 6 percent in June from a year earlier in June. In
addition, one contact notes that landlords have pulled back on
concessions, which are now reportedly being offered on fewer than 5
percent of new leases, down from 60 percent in mid-2010. Separately, the
Jersey shore summer rental market is reported to be fairly strong this
year, though the sales market for rental units remains sluggish. More
broadly, many New Jersey landlords are reported to be pushing through
rent increases for the first time since the recession. Commercial real
estate markets have been steady to somewhat weaker since the last
report. Office vacancy rates and rents were generally stable across the
District during the second quarter: market conditions improved slightly
in the Buffalo and Rochester metro areas and in Manhattan, but they
weakened moderately in northern New Jersey and metropolitan Albany.
However, industrial real estate markets weakened modestly across most of
the District, with vacancy rates edging up and rents drifting down.
Other Business Activity
Reports from business contacts point to some leveling off in the
labor market. A major New York City employment agency reports that
recruitment activity has been steady but lackluster since Memorial Day.
Hiring in the legal industry has continued to improve from very
depressed levels, with large firms hiring once again. Financial sector
hiring has been spotty. Still, the flow of applicants for office jobs
has declined somewhat. More broadly, contacts in both the manufacturing
sector and other industries report some tapering off in hiring activity
since the last report, though employment levels are still expected to
increase moderately over the second half of 2011. Looking at overall
business activity, manufacturing firms in the District report a pause in
growth in June and early July, based on the latest Empire State
Manufacturing Survey. Manufacturers also report that price pressures
have eased since the last report and that their selling prices are
steady; however, both prices paid and prices received are expected to
increase in the months ahead. Non-manufacturing firms also indicate that
business activity has flattened out since the last report, and contacts
have become somewhat less optimistic about the near term outlook.
Nonmanufacturing firms report that cost pressures remain widespread and
more contacts than last time report that they are raising selling
prices.
Financial Developments
Bankers indicate increased demand for commercial and industrial
loans but little or no change in other loan categories. Bankers also
reported a moderate decline in the demand for refinancing. Credit
standards were reported to be virtually unchanged for all loan
categories — the first time in a number of years that respondents did
not report net tightening on the commercial and industrial segment.
Respondents report decreases in spreads of loan rates over costs of
funds for all loan categories, especially residential mortgages; they
also indicate a decrease in the average deposit rate. Finally, bankers
indicate lower delinquency rates on commercial and industrial loans but
little or no change in delinquency rates for the other categories.
** Market News International Washington Bureau: 202-371-2121 **
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