October 19, 2011
Federal Reserve Districts
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Economic growth in the Second District has remained modest since the last report, though there have been some signs of improvement in the labor market. Manufacturers report some further deterioration in their assessment of overall business conditions but note that orders, shipments and employment levels have been stable. Consumer spending, on the other hand, has been comparatively robust, despite low levels of consumer confidence: auto dealers report brisk business in August and September, non-auto retail contacts report that sales have been on or ahead of plan, and tourism activity has remained strong. Commercial real estate markets have been mixed but, on balance, slightly stronger since the last report. Home sales have been mixed, with scattered signs of a pickup, while the rental market has continued to strengthen. New home construction remains stalled, aside from rental apartments. There has been substantial new hotel development in Manhattan. Conditions in New York City's key securities industry have weakened noticeably. Finally, bankers report a pickup in demand for residential mortgage loans (largely refinancing), a slight increase in demand for non-residential mortgages, some easing in credit standards for business loans, and little change in delinquency rates.
Auto dealers in upstate New York report that sales picked up since the last report, helped by a replenishment of their inventories, as disruptions from the tsunami in Japan earlier this year dissipated. Buffalo-area dealers estimate that sales of new vehicles were up 5-10 percent from a year ago in both August and September. Rochester-area dealers indicate year-over-year sales gains of 11 percent in August and in the range of 10-15 percent for September. Auto dealers in both areas continue to report strong sales of used cars, with persistently lean inventories driving up prices. Dealers' service and parts departments also report sturdy business. Auto-industry contacts describe both retail and wholesale credit conditions as "fine".
Consumer confidence remains at depressed levels. The Conference Board reports that consumer confidence among residents of the Middle Atlantic states (NY, NJ, PA) fell in August and edged down further in September. Siena College reports that consumer confidence fell across most of New York State in the third quarter, with the steepest declines seen in New York City and the mid-Hudson Valley; only the Albany region saw an increase in confidence. Tourism activity in New York City has shown continued strength since the last report. Broadway theaters report that, aside from a brief swoon in business in late August due to Hurricane Irene, attendance has been fairly strong and roughly on par with a year earlier. Moreover, revenues for the full month of September were up nearly 10 percent from a year earlier, despite fewer than usual Broadway shows opening this fall. Manhattan hotels report that revenue per room was up roughly 6 percent from a year ago in both August and September, despite the hurricane. Most of this increase reflects higher room rates, as occupancy rates were little changed. Nevertheless, this implies a sizeable rise in tourism, because there are 6-7 percent more hotel rooms in Manhattan than a year ago.
Construction and Real Estate
Commercial real estate markets have been mixed since the last report. In New York City and metropolitan Buffalo, office vacancy rates declined in the third quarter, while rents moved up. However, vacancy rates rose in Westchester and Fairfield counties and were little changed across other parts of the District, while asking rents were generally down modestly. The market for industrial and warehouse space has not changed noticeably, except in metropolitan Albany and northern New Jersey, where asking rents are down moderately from a year ago. New office construction and development remains sluggish, but a number of major hotel development projects have been announced recently or are already underway in New York City.
Other Business Activity
Manufacturing firms across New York State indicate that their assessment of general business conditions has deteriorated further since the last report, although they note that orders and shipments have held steady. Respondents in that sector anticipate only modest improvement in business conditions and activity in the months ahead. Manufacturers also note that input price pressures have moderated somewhat and that selling prices have remained essentially stable.