January 16, 2002
Federal Reserve Districts
|Skip to content
Economic activity in the Second District has shown further signs of rebounding since the last report. Aside from steep increases in business insurance costs, price pressures remain subdued. Labor markets have recently shown signs of stabilizing. Retailers report that holiday-season sales--though, on average, little changed from a year earlier--were generally above plan, and appeared to be gaining momentum in late December and early January. Virtually all contacts describe inventories as lean. Most of the retailers surveyed report steep price discounting, and about half indicate that they hired fewer holiday workers than a year earlier.
Housing markets in most of the District have strengthened further since the last report, though Manhattan's rental market remains slack. Manhattan's office market appears to have stabilized in November and December, while suburban markets have softened further. Hotel occupancy rates continued to recover in November, but room rates were down 23 percent from a year earlier. Purchasing managers report sharp improvement in business conditions in the New York City area, but further weakness in the Buffalo area. Finally, bankers report stronger demand for home mortgages, ongoing tightening in credit standards, and little change in delinquency rates.
Most contacts report that sales strengthened substantially toward the end of the month, and remained strong in early January. Business at Manhattan stores improved noticeably in December but remained somewhat weaker than in the rest of the region. More generally, aggressive promotion and discounting were widely reported, though one major chain described the 2001 holiday season as somewhat less promotional than the prior year's. Similarly, based on a trade association's annual survey of small retailers across New York State, holiday sales were virtually unchanged from a year ago, while discounting was more pronounced than in 2000.
In general, retailers note that the strongest sales categories involved goods for the home--bed and bath, furniture, appliances, home improvement, appliances, and electronics. Most contacts also note fairly strong sales of women's apparel. In contrast, sales of men's clothing and luggage remained particularly sluggish.
About half of the retail chains contacted report a decline in holiday staffing, compared with 2000, while the rest indicate no change. Retailers report lower employee turnover and little or no wage pressure but continue to note sharp increases in health, property and other business insurance costs.
Construction and Real Estate
A leading New York City housing appraisal firm reports that co-op and condo sales activity recovered steadily in November and December but remained well below levels of a year earlier. Manhattan apartment prices are estimated to be down about 5-10 percent, on average, over the past 12 months, though there are still some reports of lower-priced units selling at above the asking price. The rental market has weakened more sharply, with rents reported to be down as much as 20 percent.
The single-family housing market has held up particularly well. Homebuilders in northern New Jersey indicate that a supply shortage is, once again, buoying home prices. Similarly, New Jersey's existing home market has reportedly snapped back, led by the moderately-priced segment. In New York State, the market for existing homes remained strong in November: unit sales were roughly on par with a year earlier while prices were up nearly 6 percent, on average. Moderate price declines were recorded in the Rochester area and Westchester County, but New York City, Long Island and most of the Hudson Valley registered double-digit gains.
Other Business Activity
Manhattan hotels report that occupancy rates continued to recover in November and were down only 10 points from a year earlier. Hotels' room rates edged up in November but were still 23 percent lower, on average, than a year earlier. While tourism from overseas is still described as weak, there has reportedly been a noticeable rebound in domestic visitors.
Surveys of purchasing managers across the District paint a mixed picture. Purchasers in the New York City area report a sharp snapback in business conditions in December, following widespread weakness in October and November. However, in a survey taken prior to the late-month snowstorm, Buffalo-area purchasing managers indicate a marked weakening in business conditions in December--widespread declines were reported in employment, new orders and especially production activity.
Most Buffalo-area businesses queried in early January report that the snowstorm caused partial or complete shut-downs on December 27 and 28; disruptions were widespread but generally short-lived. More generally, manufacturers across New York State report some pickup in general business conditions and new orders in late December and early January and express continued optimism about the near-term outlook.