March 6, 2002
Federal Reserve Districts
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Economic conditions in the Second District have been mixed since the last report, with hiring remaining weak but housing quite strong. Retail sales, which had been a bit lean in January, were generally reported to be back above plan in February. Retailers indicate that selling prices have been steady in early 2002. Purchasing managers report mixed business conditions in January, though a survey of manufacturers across New York State suggests ongoing improvement in general business conditions in early February.
Housing markets appear to have gained further momentum since the last report, in both metropolitan New York City and parts of upstate New York. New York City's office market has shown signs of bottoming out, though suburban markets have slackened further. Manhattan hotels experienced less of a seasonal slowdown than normal in January. Finally, bankers report some weakening in demand for consumer loans and home mortgages, ongoing tightening in credit standards, and a slight up-tick in consumer delinquency rates.
According to Siena College's latest monthly survey of New York State residents, confidence was little changed around the District in January. More recently though, the Conference Board reports that consumer confidence in the Middle Atlantic region tapered off in February.
Construction and Real Estate
In contrast, the residential market has continued to gain momentum. A leading New York City housing appraisal firm and a major brokerage both report a substantial pickup in the co-op and condo market in January and early February. Apartment sales activity has been brisk in recent weeks, with selling prices up modestly from a year earlier and transactions volume up substantially. In addition, the inventory of available homes is back down, and bidding wars are, once again, increasingly common.
The single-family housing market has also been quite strong. Homebuilders in northern New Jersey report a brisk rebound in demand and indicate that a supply shortage is again buoying home prices. Similarly, existing home sales prices in late 2001 were up on the order of 10 percent across most of the District, while sales volume was up slightly.
Other Business Activity
Manhattan hotels report that occupancy rates posted a normal seasonal decline in January. After adjusting for seasonal movements, January's occupancy rate was 78 percent, virtually the same as in December, and down only 4 points from a year earlier. The average room rate was down about 15 percent from a year earlier in January, compared with declines of 20-25 percent in the fourth quarter of 2001. Industry contacts note that business remained relatively favorable in February, buoyed by the World Economic Forum meetings.
There are indications of improvement in New York State's manufacturing sector. A rising proportion of manufacturers across New York State report improvement in general business conditions and a sizable majority express optimism about the near-term outlook, based on a survey conducted in early February. However, surveys of purchasing managers offer more mixed results. New York City area purchasing managers report some weakening in business conditions in January--particularly in non-manufacturing sectors. Buffalo-area purchasers indicate that both production and new orders continued to decline in January, though declines were less widespread than in December. However, Rochester-area purchasers report modest improvement in business conditions in January, following a sharp pickup in December. Purchasers in the New York City area report fairly widespread declines in input prices, while those in the Buffalo area indicate moderate increases.