October 21, 2009
Federal Reserve Districts
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The Second District's economy has shown scattered signs of a pickup since the last report. The labor market has given mixed signals, with some signs of strengthening in manufacturing, but ongoing weakness in hiring in other sectors. Manufacturing sector contacts report increased activity and remain optimistic about the near-term outlook. Auto dealers indicate that sales declined sharply in September, as expected, reflecting the end of the cash-for-clunkers program, as well as depleted inventories. However, general merchandise retailers report that sales improved in September and were ahead of plan and roughly on par with a year earlier. Consumer confidence, though still low, has moved up moderately since the last report. Tourism activity in New York City has been sluggish but relatively steady, with leisure visitors partly offsetting an ongoing pronounced slump in business travel.
Commercial real estate markets--in both the office and industrial categories--have been steady to moderately weaker since the last report. Residential real estate markets have been mixed since the last report, but generally weaker, especially at the high end of the market. Home sales activity reportedly rebounded a bit from depressed second quarter levels, but prices, as well as rents, have continued to decline. Finally, bankers report rising delinquency rates--particularly on consumer and commercial mortgage loans--along with ongoing tightening in credit standards; loan demand continued to decline, except for residential mortgages, where bankers report some pickup in demand.
Consumer confidence measures, while still low, have risen moderately since the last report. Among residents of the Middle Atlantic states (NY, NJ, PA), confidence rose to its highest level in a year and a half in September, according to the Conference Board. Siena College reports that consumer confidence among New York State residents was little changed in September, after jumping to a more than one-year high in August. Tourism activity in New York City has remained sluggish but steady since the last report, with an ongoing pronounced slump in business travel partly offset by leisure visitors. Manhattan hotels report that occupancy rates were steady in September, while room rates continued to run 25-30 percent down from comparable 2008 levels. Revenues were down roughly 30 percent from a year earlier. Bookings for October suggest that occupancy rates may be somewhat higher than a year earlier, though advance bookings for November appear relatively soft at this point. Broadway theaters report that attendance picked up somewhat in September and early October but remained slightly lower than a year earlier; ticket prices remained roughly 15 percent above last year's levels, pushing total revenue 10 to 15 percent ahead of year-ago levels.
Construction and Real Estate
Housing markets remain sluggish across the District, though sales activity has picked up in certain areas. A New Jersey contact indicates that resale activity is inching upward, though prices continue to be depressed due to a substantial volume of foreclosures and short sales. New home sales remain flat in northern New Jersey, though the inventory is gradually diminishing, due to a lack of new development. In western New York State, home sales activity reportedly slowed in August and remained relatively sluggish in September, while prices generally remained steady; contacts express concern that the upcoming expiration of the $8,000 tax credit for first-time homebuyers will adversely affect sales and prices. Manhattan's apartment sales market remained weak in the third quarter. Sales activity rebounded moderately from the prior quarter but remained lower than a year earlier; prices continued to decline and were estimated to be down 18 percent from a year earlier on a per-square-foot basis. The inventory of listings declined modestly, but the average number of days on the market continued to climb. Manhattan's rental market slackened further in September, with average asking rents continuing to run about 10 percent below a year earlier; in addition, landlords are reported to be offering increasingly generous concessions--waiving fees and offering one or more months of free rent. Vacancy rates are reported to have edged down seasonally, but this is expected to reverse in the upcoming (typically slower) winter season.
Other Business Activity
Manufacturing firms in the District report a further pickup in business activity since the last report, as well as some upturn in employment at their firms for the first time in more than a year. Respondents are also increasingly optimistic about the near-term outlook and expect to hire more workers and spend more on capital, on balance, in the months ahead. Both manufacturers and other firms report moderate increases in prices paid but little or no change in selling prices; looking to the months ahead, though, non-manufacturers anticipate modest increases in prices received.