September 6, 2006
Federal Reserve Districts
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Economic activity in the Second District has shown signs of decelerating since the last report, though business contacts generally report that the labor market remains steady and strong. Manufacturers report widespread increases in input prices; they also note further deceleration in business activity and are a bit less optimistic about the near-term outlook. Retailers indicate that sales were on or close to plan in August, while prices were relatively flat. Tourism activity was mixed around generally robust levels: New York City hotels continue to report strong revenue growth, but Broadway theaters report that attendance, though still high, retreated in July and August.
Both new home construction and the home purchase market continued to slacken in July and August, but Manhattan's apartment rental market reportedly strengthened further. Office markets across the New York City metro area were steady to stronger in July and August while the market for industrial space was mixed. Activity in the securities industry activity is reported to have weakened across the board in July and August. Finally, bankers again report widespread slackening in loan demand, somewhat tighter credit standards, and little change in delinquency rates.
Tourism activity has been mixed but generally at a robust level since the last report. Manhattan-hotels report that business was strong in July, which is usually a relatively slow month; occupancy rates remained in the high 80s--virtually unchanged from a year ago--while room rates were up 9 percent from a year earlier. In contrast, Broadway theaters report that business weakened moderately in July and the first three weeks of August; attendance was down roughly 7 percent from a year earlier, while total revenue was up less than 3 percent.
Construction and Real Estate
Manhattan's co-op and condo market slowed further in July and early August. The inventory of homes on the market is reported to have risen noticeably, and units are staying on the market for longer. Both the number of transactions and total sales volume were down from a year earlier in August; the high end continues to be the most active market. At the same time, Manhattan's rental market was characterized as increasingly robust in July and August, across the board, but especially at the high end of the market: The inventory of available units has continued to shrink, rents are up, and prospective renters are signing leases more quickly than in the recent past.
Commercial real estate markets across the New York City area have been steady to stronger since the last report. Between the end of June and late August, office vacancy rates declined and asking rent increased considerably in New York City, Fairfield County, Westchester County, and Long Island. In northern New Jersey, however, vacancy rates edged up while rents were little changed. Similarly, industrial vacancy rates fell in Long Island, Westchester, and Fairfield Counties, but rose to a more than ten-year high in northern New Jersey.
Other Business Activity
Based on our August Empire State Manufacturing Survey, respondents report further deceleration in business activity and continued widespread increases in input prices but only limited increases in selling prices. Manufacturers remain optimistic about the near-term outlook, though less so than in July.
Bankers report tightened credit standards for all loan categories except residential mortgages, where standards remained unchanged. In contrast, more than one in five bankers reports tightened credit standards for commercial mortgages, while no bankers report eased standards. Bankers report continued widespread increases in both deposit rates and loan rates across all categories. Delinquency rates were little changed across all loan categories, though a slight increase was reported for residential mortgages.