November 28, 2007
Federal Reserve Districts
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The Second District's economy has continued to expand since the last report, though at a somewhat more subdued pace than in recent months. The labor market has remained strong in October and early November. Manufacturers report ongoing expansion in activity in early November, with increased price pressures. In contrast, non-manufacturers report some weakening. But respondents in both sectors express less optimism about the future business outlook than in recent months. Retailers show mixed sales results for October and some have scaled back expectations for the holiday shopping season. Tourism activity in New York City is said to have remained strong, despite a mid-November strike shutting most Broadway theaters. Housing markets remain mixed, with Manhattan's co-op and condo market showing continued resilience but single-family housing markets across New York State increasingly soft. Manhattan's office market, though still fairly tight, eased off a bit in October. Finally, bankers report weakening loan demand in all categories but particularly for home mortgages; they also report tightened credit standards on commercial loans and mortgages, and moderate increases in delinquency rates across all categories, most notably on residential mortgages.
Tourism activity in New York City has been steady at a high level, despite a Broadway theater strike. Manhattan hotels report that occupancy rates exceeded 90 percent in October, little changed from last year, while room rates are reported to be up by 16 percent. Broadway theaters report that attendance and revenues were at high levels in October and early November but down a bit from a year ago. A strike starting November 10 shut most Broadway theaters but there is, thus far, no sign of deleterious effects on tourism overall. Consumer confidence has waned since the last report. The Conference Board's survey of Middle Atlantic residents indicates a pullback in confidence in October, reversing an increase in September. Similarly, Siena College's survey of New York State residents shows confidence falling in October, led by a particularly steep decline in upstate New York.
Construction and Real Estate
Manhattan's co-op and condo market showed continued resilience in October and early November, with prices continuing to run modestly above year-ago levels and sales volume picking up moderately compared with the third quarter. The inventory of units on the market is reported to be down by roughly a third from comparable 2006 levels. Long Island's market is reported to remain somewhat sluggish, though demand remains strong in the pricier Hamptons area. Reports from Realtors across New York State indicate continued weakness in the market for single-family homes, with prices down 7 percent from a year ago and unit sales down nearly 20 percent.
Other Business Activity
New York State manufacturers report steady improvement in business conditions in early November; however, contacts express considerably less optimism about the six month outlook than in recent months. Firms report increasingly widespread escalation in both current and expected input prices in early November. Overall, a growing proportion of non-manufacturing firms in the District report some weakening in general business activity as of early November, and express a good deal less optimism about the general outlook; however, considerably more firms continue to report rising than falling employment at their firms, and the same is true with respect to expected changes in the next six months.