April 26, 2006
Federal Reserve Districts
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The Second District's economy has continued to expand since the last report, but the overall rate of growth may have slipped a bit. The labor market has grown increasingly tight, and there are signs that wages have accelerated in some sectors. More broadly, though, input price pressures remain widespread but do not appear to have intensified. Manufacturers report some deceleration in activity in recent weeks but continue to report increased employment. Despite unseasonably cool weather, retailers report that sales were generally close to plan in March and early April, though tourism has softened slightly since the last report. Consumer confidence improved in March.
Housing markets showed ongoing signs of softening in the first quarter, though sales of Manhattan apartments reportedly picked up in March. Commercial real estate markets across the New York City metro area were mixed in the first quarter: office rents were up from the prior quarter, but rents on industrial space slipped. New commercial construction remains relatively sluggish, but residential development continues to be robust. Finally, bankers again report some weakening in loan demand, some tightening in credit standards on consumer and home mortgage loans, and an up-tick in delinquency rates.
Tourism has softened slightly since the last report but remains at a high level. Manhattan hotels report that occupancy rates tapered off in February, but rebounded in March; still, occupancy rates have been running about 3 percentage points below comparable 2005 levels. However, room rates were reported to be up 10 percent from a year earlier in February and up 13 percent in March. Broadway theaters report that attendance slipped below comparable 2005 levels in March, while revenues were little changed, but both rebounded noticeably in early April.
Consumer confidence in the region strengthened in March. Based on the Conference Board's survey of residents of the Middle Atlantic states (NY, NJ, PA), consumer confidence rose sharply in March, reaching its highest level in nearly four years. Based on Siena College's survey of New York State residents, confidence posted a more moderate gain, climbing to a 14-month high.
Construction and Real Estate
Commercial real estate markets were mixed in the first quarter. Office vacancy rates across the New York City metro area were mixed but down slightly overall; northern New Jersey's rate, though still relatively high, edged down to a nearly four-year low. Asking rents for office space were up sharply in Manhattan but were generally flat in the outlying markets. The industrial market showed signs of weakening: although vacancy rates were little changed, rents declined throughout the New York metropolitan area.
Overall, commercial construction activity appears relatively stable--compared with 2005, there is reported to be somewhat less industrial construction underway but more office and hotel construction. Still, contacts note that the level of commercial development remains relatively low and note that a good deal of office and hotel space, predominantly in New York City, has been converted to residential use.
Other Business Activity