July 28, 2010 Federal Reserve Districts Second District--New York

Skip to content Summary Districts Boston New York Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco Full report

The Second District's economy has shown further signs of strengthening, on balance, since the last report. Input price pressures have receded a bit, while consumer prices appear to be steady. There are signs of improvement in the labor market across a range of industries. Manufacturing-sector contacts report some recent leveling off in business activity, after a strong second quarter. General merchandise retailers report ongoing improvement in business, with sales running on or above plan and inventories reported to be at favorable levels. Auto dealers report that sales have tapered off in recent weeks but remain ahead of 2009 levels. Tourism activity in New York City has continued to be robust since the last report, helped by a reported pickup in business travel. Commercial real estate markets have generally been steady since the last report, while residential real estate markets have shown signs of softening. Finally, bankers report a pickup in demand for both consumer and home mortgage loans but some slippage in demand for commercial loans and mortgages; they also report declining consumer delinquency rates and less widespread tightening in credit standards than in recent months. Consumer Spending Non-auto retailers report that sales have remained on or above plan since the last report, with comparable-store gains of roughly 5 percent over a year earlier in June and 8-12 percent in early July. Contacts report particular strength at New York City stores, whereas a major mall in upstate New York indicates more moderate growth. Contacts generally indicate that sales of fashion items and apparel were particularly strong, whereas sales of big-ticket appliances were relatively sluggish. Inventories are reported to be at satisfactory levels, while selling prices are stable to down slightly; prices are expected to remain steady during the second half of 2010 and rise modestly in 2011. An association of auto dealers in upstate New York reports that sales of new autos, which were up 10 percent from a year earlier in May, retreated a bit in June but were still up moderately from comparable 2009 levels. Used auto sales have been running lower than a year ago, due largely to lean inventories. Dealers report that retail credit conditions have remained favorable and that wholesale credit conditions have improved. Consumer confidence weakened noticeably in June: The Conference Board reports that confidence among residents of the Middle Atlantic states (NY, NJ, Pa) fell to its lowest level this year, and Siena College's latest survey of New York State residents shows confidence slipping to its lowest level in more than a year. Tourism activity in New York City has grown increasingly robust since the last report. Manhattan hotels indicate that occupancy rates rose to a record high for May and remained exceptionally high in June--even with a sizable increase in the number of hotel rooms over the past year. Room rates are running 10 to 15 percent higher than a year earlier, and total revenues are reported to be up more than 20 percent. Much of the recent improvement is attributed to a rebound in business travel. Broadway theaters report that attendance remained brisk in June but tapered off moderately in early July. Revenues were up 3 percent from a year earlier in June and little changed in July. Construction and Real Estate Housing markets have softened somewhat, on balance, since the last report, with much of the weakening attributed to the expiration of the home-buyer tax credit. An authority on New Jersey's housing industry characterizes housing demand as sluggish and lacking momentum. Activity has tapered off, while transaction prices for both new and existing homes appear to be drifting down. Northern New Jersey's rental market has also slackened, with a growing number of available units on the market and landlords offering more incentives and concessions; a number of buildings initially intended as condos have converted to rentals. Similarly, Buffalo-area Realtors report that home sales activity weakened substantially in May and June, reportedly due largely to the expiration of the extended homebuyers' tax credit, though selling prices continued to run ahead of comparable 2009 levels. In New York City, conditions were more mixed, with co-op and condo sales activity picking up in the second quarter but prices generally holding steady. The number of apartment sales rose by a bit more than the seasonal norm in the first quarter. The median sales price of an apartment was down 7 percent from a year ago in Queens but up 5 percent in Brooklyn. In Manhattan, the median price rose roughly 8 percent from a year earlier, but the price per square foot was virtually unchanged. Manhattan's rental market, though still well below its peak of a few years ago, appears to be on the rebound: leasing activity picked up noticeably, rents have stabilized, landlords are giving less generous concessions, and the inventory of available rentals has declined. Commercial real estate markets across the District were mixed but, on balance, little changed since the last report. Office leasing activity picked up considerably in New York City, and vacancy rates declined modestly, but asking rents are still down more than 20 percent from a year ago. Vacancy rates were steady in Long Island and Northern New Jersey, while asking rents were down slightly--compared to both the first quarter and a year earlier. In Westchester and Fairfield counties, market conditions improved slightly, as vacancy rates edged down and asking rents rose. Office markets were mixed in upstate New York: vacancy rates edged up in most major markets but asking rents continued to run modestly above year-ago levels. Industrial markets were mostly softer in the second quarter: industrial vacancy rates rose across most of upstate New York and in Westchester and Fairfield counties but were little changed in Long Island and down modestly in northern New Jersey. Industrial rents were down moderately from a year ago in most areas. Finally, Manhattan's retail leasing market picked up in the second quarter, while northern New Jersey's remained stable. Commercial development remains very sluggish in general, though developers plan further hotel construction in New York City. Other Business Activity Manufacturing firms in the District report some leveling off in business activity in recent weeks, after reporting fairly widespread improvement in the second quarter. Firms still report that they are adding workers, on net, but to a less widespread degree than in recent months. Contacts outside the manufacturing sector, however, report some recent improvement in general business conditions and a pickup in employment. Contacts also remain fairly optimistic about the near term outlook and plan to expand hiring activity and capital spending moderately in the months ahead. Both manufacturers and other firms report moderate increases in prices paid but virtually no change in selling prices. A major NYC employment agency, specializing in office jobs, reports that hiring activity has picked up since the last report, as demand from the legal sector remains brisk and financial sector hiring has picked up in recent weeks. Salaries for administrative jobs have started to edge up. There has been a relatively light flow of 2010 college grads looking for jobs. Separately, a securities-industry contact notes that, while there are ongoing layoffs in certain areas related to mergers and restructuring, major firms are hiring in the areas of accounting, compliance, and systems development. Compensation at large financial firms is reported to be holding relatively steady. Financial Developments Contacts at small to medium sized banks in the District report that loan demand was mixed across the consumer and commercial loan groups: demand tended to increase for consumer loans and residential mortgages but decrease for commercial mortgages and commercial and industrial loans. This marks the first time since 2005 that more respondents reported rising than falling consumer loan demand. Bankers' responses also suggest a continued increase in refinancing activity. Respondents indicate a tightening of credit standards for all categories except consumer loans, though the tightening across all segments is reported to be less widespread than it has been at any time in the past three years. Spreads of loans rates over cost of funds are indicated to be steady for consumer loans and residential mortgages but higher on commercial loans and mortgages. Banks mostly indicate that average deposit rates have decreased. Finally, respondents reported a decrease in delinquency rates for consumer loans but little or no change in delinquencies in other loan categories. Return to top Boston Philadelphia