June 8, 2011
Federal Reserve Districts
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The Second District's economy has continued to expand since the last report, though at a somewhat diminished pace. Labor market conditions have continued to improve modestly. Retail sales have held steady at favorable levels since the last report. Consumer confidence reports have been mixed. Tourism activity picked up in April but tapered off a bit in early May. Commercial real estate markets have been relatively stable. The residential purchase market has been steady to somewhat softer, but the rental market has continued to improve; new residential construction remains low. Finally, bankers report further weakening in consumer loan demand, tighter credit standards on the commercial sector, and higher delinquency rates on consumer loans but somewhat lower delinquencies in other loan categories.
Auto dealers in upstate New York report that sales of new vehicles have cooled somewhat since the first quarter but remain at fairly high levels, up moderately from a year earlier. Some of the slowing in sales is attributed to supply disruptions related to the tsunami in Japan. One local auto dealers' association reports an exceptionally low inventory of used vehicles, which has hampered sales volume and pushed prices up. Retail credit conditions continued to improve, while wholesale credit conditions were mixed.
Consumer confidence surveys have given mixed results. Siena College reports that consumer confidence among New York State residents fell to its lowest level of the year in April--largely attributed to surging food and energy prices. In contrast, the Conference Board reports that consumer confidence among residents of the Middle Atlantic states (NY, NJ, Pa) surged in April, reaching its highest level since late 2007; the rise was largely driven by improved perceptions of job availability.
Tourism activity in New York City strengthened in April, though there were signs of some pullback in May. Occupancy rates at Manhattan hotels moved up by more than the seasonal norm in April, and room rates accelerated, running 5-10 percent higher than a year earlier. Partly due to a spate of new show openings, Broadway theaters report that both attendance and total revenues surged in April and were running 10 to 15 percent ahead of a year earlier, after a sluggish March,. Attendance and revenues slipped in May, although both were still up from a year earlier.
Construction and Real Estate
An authority on New Jersey's housing industry reports that sales of existing homes have slowed since the last report, and new home sales remained depressed. A sizable inventory of foreclosed properties--roughly equal to nine months of sales--is reported to be putting downward pressure on home prices overall. However, low volume and a sizable incidence of distressed sales make it difficult to gauge price trends in northern New Jersey. Activity in New York City's co-op and condo market was mixed but generally stable since the last report, with Manhattan, Brooklyn and Bronx holding steady--in terms of both prices and sales activity. Some softening was evident in Queens and Staten Island. Long Island's market has been stable, though conditions have weakened in the Hamptons, where sales activity is off, especially at the high end.
In contrast with the sluggish purchase market, rental markets have performed fairly well, particularly in New York City: Manhattan rents are reported to be up roughly 6 percent from a year ago. Moreover, when the widespread withdrawal of landlord concessions is factored in, the rise in effective rents has been steeper. Rental vacancy rates have drifted down. Contacts in both New York City and northern New Jersey see relatively little new residential construction, and note that most new and proposed development is for rental housing.
Commercial real estate markets have been largely steady since the last report. Office markets showed signs of modest improvement in New York City, Long Island, and most of upstate New York, as vacancy rates edged down while asking rents were steady to up slightly. However, market conditions weakened somewhat in northern New Jersey, Westchester and Fairfield Counties, and in the Albany area. Industrial vacancy rates rose in Long Island but were little changed in other markets. In much of the District, asking rents on industrial properties, which had been declining through the end of 2010, have leveled off or moved up modestly in recent months.
Other Business Activity
Non-manufacturing firms broadly indicate that both business and hiring activity have been steady to modestly higher since the last report. Contacts have become slightly less optimistic about the near term outlook and have scaled back hiring plans somewhat. Non-manufacturing firms report that cost pressures remain widespread but have not broadened since the last report. Manufacturing firms in the District report that business activity was generally steady in April and early May. Contacts report that they are adding workers, on net, and plan to continue to do so in the months ahead. Manufacturers also note increasingly widespread price pressures, and roughly two in five say they plan to hike their selling prices in the months ahead. A trucking-industry contact reports that shipping activity has shown no sign of slipping, despite the recent surge in diesel prices.