WASHINGTON (MNI) – The following is the text of the Second District
Beige Book summary of current economic conditions, published Wednesday:
SECOND DISTRICT — NEW YORK
On balance, the Second Districts economy showed signs of
decelerating since the last report. Input prices have continued to rise
moderately, while consumer prices appear to be steady to down slightly.
General merchandise retailers report that sales have slowed since the
last report, though auto dealers categorize sales as fairly good.
Commercial real estate markets have generally been steady to softer
since the last report. Residential real estate sales markets weakened to
very low levels, though New York Citys rental market continued to
improve modestly. Manufacturing-sector contacts report some further
deceleration in business activity. Tourism activity in New York City has
been steady at a strong level since the last report, buoyed by rising
business travel. Overall, the labor market, though still slack, has
shown further modest signs of improvement. Finally, bankers report
steady to weaker loan demand, steady to higher delinquency rates and
some tightening in credit standards, but also some narrowing in loan
spreads.
Consumer Spending
Non-auto retailers report that sales have slowed across the
District since the last report, with comparable-store sales running just
2-3 percent ahead of a year earlier, on average, in July and up just 1-2
percent in the first few weeks of August. The slowing has been
particularly pronounced at New York City stores. Two major shopping
malls in western New York State also report that sales weakened in July
through early August, and they report substantial discountingespecially
at clothing retailers. Despite this recent slowing, most contacts
continue to report that inventories generally remain at favorable
levels. Contacts report steady to modestly declining selling prices and
acquisition costs. One contact notes that steep discounting has been
necessary to move merchandise. Auto dealers in the Rochester area report
that sales of new autos were down roughly 10 percent from a year ago in
July and down 15 to 20 percent in the first half of August, while
Buffaloarea dealers report a 5 percent year-over-year increase in July
and project a moderate decline in August. Still, contacts in both areas
describe the current sales pace as fairly good, with the 12-month
comparisons depressed by last summers “Cash for clunkers” program.
Dealers report that both retail and floor-plan credit conditions have
continued to improve.
Tourism activity in New York City has been steady at a strong level
since the last report. Manhattan hotels report that occupancy rates
remained close to 90 percent in July and August, even as the number of
hotel rooms has risen by more than 5 percent over the past year.
Moreover, room rates continued to run 10-15 percent ahead of this time
last year. Business travel has reportedly increased in recent months,
accounting for a growing share of revenues. Broadway theaters report
that attendance picked up a bit in the latter part of July and remained
brisk in Augustup roughly 5 percent from a year earlier, though the
average ticket price was down 4 percent in August from comparable 2009
levels. Overall revenues were up moderately from a year earlier in July
but flat in the first three weeks of August.
Construction and Real Estate
Housing markets have shown further signs of softening since the
last report, with much of the weakness again attributed to the
expiration of the home-buyer tax credit. Buffalo-area Realtors say the
market has cooled dramatically and describe home sales activity as
totally dead in July and early August; historically low mortgage rates
are said to be having little if any positive effect. They also report
that pending sales activity has fallen sharply and that the number of
active listings has increased. One contact in western New York State
anticipates consolidation in the real estate industry, as some agents
and brokers are likely to merge or exit the market. Across New York
State more broadly, the number of sales transactions fell by roughly
half from June to Julya far steeper drop than the seasonal normand was
down 35 percent from a year earlier. The median reported sales price
rose in July and was up from a year earlier, though one industry contact
notes that this may reflect a shift in the mix, as the expiration of the
tax credit predominantly affected the lower end of the market. An
authority on New Jerseys housing industry reports that market
conditions appear to be weak but concedes that underlying fundamentals
are difficult to gauge during this perennially slow season. With
builders holding off on new construction, inventories have gotten quite
low, though prices still seem to be drifting lower. Most of the
multi-family development along New Jerseys “Gold Coast” (across from
Manhattan) has now shifted to rentals.
In New York City, conditions were more mixed. Activity in the
citys co-op and condo market has fallen off by somewhat more than the
seasonal norm in July and August, following a brisk second quarter;
activity has dropped off particularly sharply on Long Island and, in
general, at the lower end of the market. A leading appraisal firm
reports that prices remain essentially flat in Manhattan and across New
York City generally. The appraisal business has reportedly remained
strong. Manhattans rental market, though still somewhat slack, has
continued to recover: rental activity has remained stable at a moderate
level, while effective rents have reboundedcontract rents have risen
only modestly, but landlords are offer fewer concessions (i.e. fewer
months free rent). A considerable volume of new development will be
coming onto the market, probably largely as rentals, in the months
ahead.
Office markets across the District were generally steady to weaker
since the last report. Vacancy rates were steady throughout most of the
District, though they increased modestly in Manhattan and the Albany
area. Asking rents were also little changed overall; they edged up in
the Long Island and Syracuse areas but edged down in the northern New
Jersey and Albany markets. Asking rents are still down sharply from a
year ago in Manhattan and down moderately in Long Island and northern
New Jersey; however, rents are up from a year ago in the Buffalo,
Syracuse and Albany areas. Industrial markets were also steady to weaker
across the District since the last report. Industrial vacancy rates rose
modestly across the New York City metro area and held steady in the
Buffalo and Rochester areas. Asking rents were generally down 3-4
percent from a year ago.
Other Business Activity
Manufacturing firms in the District report some leveling off in
conditions in July and August, after reporting fairly widespread
improvement during the first half of the year. However, a sizable number
of manufacturing contacts indicate that they are increasing employment.
Non-manufacturing firms report ongoing improvement in general business
conditions and continue to report moderate increases in employment; they
remain fairly optimistic about the near term outlook. Both manufacturers
and other firms report ongoing increases in prices paid but only modest
changes in selling prices. Separately, a trade association survey of New
York State firms, conducted in July, indicates fairly widespread
optimism about revenue growth and notes that far more respondents plan
to increase than decrease head-counts in the next year.
A major NYC employment agency, specializing in office jobs, reports
that, while the job market is difficult to gauge during the slow summer
season, market conditions appear to be improving gradually and
conditions are not as dire as last summer. The pool of available
candidates is not as large as it was last summer; however, some people
who had given up looking are starting to come back.
Financial Developments
Contacts at small to medium sized banks in the District report
decreased demand for consumer loans and commercial mortgages, and steady
demand for commercial and industrial loans. Demand for residential
mortgages picked up, but this may largely reflect refinancing of
existing loans (which rose sharply). Respondents indicate a tightening
of credit standards for all categories particularly in the commercial
mortgage category. For the first time in well over a year, bankers
report a decrease in spreads of loan rates over costs of fundsprimarily
for residential mortgages. Bankers report little or no change in spreads
for other loan categories. Finally, bankers responses point to
increased delinquency rates for residential mortgages, commercial
mortgages and commercial and industrial loans but little change in
delinquencies for consumer
** Market News International Washington Bureau: 202-371-2121 **
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