December 4, 1996
Federal Reserve Districts
|Skip to content
The Second District’s economy continues to expand at a moderate pace, with little change since the last report. Sales at large retailers slowed in late October, but were generally back on track in early November, with sales running on or above plan. Manhattan’s commercial real estate markets remain strong, while the housing market has improved slightly. Unemployment leveled off at a cyclical low of about 6 percent in October, while private-sector job growth continued to slow. The Canadian GM strike reportedly had some effect on manufacturing activity in upstate New York in October, although purchasing managers surveys indicate only a modest deceleration in growth. There has been little change in price pressures since the last report; however, retailers report somewhat heavier discounting in recent weeks. Finally, regional banks report weaker loan demand, slightly tighter credit standards and some further increase in consumer delinquency rates.
Virtually all retailers report that inventories are at desired levels; only one contact reports that they are a bit high. Looking ahead to the upcoming holiday season, all of the retailers surveyed still anticipate the same sales gains as in the last report--these range from 2.5 to 6 percent on a same-store basis. A Conference Board survey conducted every November shows consumers in the region planning to spend 13 percent more than last year, on average, despite low levels of consumer confidence.
Selling prices are essentially flat; a number of contacts note a pickup in discounting activity in recent weeks, although some simply attribute this to merchants eager to get a jump on the shorter-than-usual holiday season (due to a late Thanksgiving). Merchandise costs remain virtually flat, and there has been no reported increase in wage pressures.
Construction and Real Estate
Manhattan’s commercial real estate markets remained strong in October. Midtown’s office availability rate declined from 14.2 to 13.9 percent, led by an "outburst of leasing activity"; downtown’s rate held steady at 23.4 percent. (Availability rates include vacant space, as well as space coming on the market over the next six months to a year.) Commercial rents were essentially flat.
Other Business Activity
However, income growth remains strong, largely fueled by the bull market on Wall Street, and tax receipts continue to grow at a fairly strong pace--New York City recently revised up its projected FY 1997 revenues by $450 million. Tourism remains strong, with hotel occupancy rates holding steady at 16-year highs and room rates up more than 15 percent from a year ago.
Average loan rates declined for all types of loans. The residential mortgage segment experienced the largest decline, with rates lower at almost 40 percent of banks and higher at only 7 percent. In contrast, average deposit rates were flat at almost two-thirds of participating banks. Delinquency rates continued to climb, on balance, with 31 percent of banks reporting a general increase and 22 percent indicating declines; the largest reported increases were for consumer loans.