September 17, 1997
Federal Reserve Districts
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The Second District's economy has continued to expand at a steady pace since the last report. Major retailers report mixed results for August; on balance, sales were close to plan. Manhattan's office markets tightened further in August, though rents remain fairly stable. Housing markets continued to show moderate improvement in recent weeks, led by a pickup in upstate New York and northern New Jersey. Regional purchasing managers' reports indicate moderate growth in manufacturing activity in August. Price pressures in the District remained modest, on balance. Finally, local banks report that loan demand picked up, while delinquency rates were little changed.
Construction & Real Estate
The region's housing market continued to improve gradually overall, though there have been some intra-regional shifts. Despite ongoing anecdotes of bidding wars on New York City co-ops and condos, a large broker that tracks apartment sales in Manhattan reports that prices retreated in June and July, after surging 20 percent in the Spring months (year-to-date, the average per-room price is up roughly 5 percent from 1996 levels). Permits for new apartment construction in New York City and its northern suburbs continued to trend up in July. More such permits have been issued since the beginning of 1996 than in the prior five years combined; however, most of these have yet to come on the market. Permits for single-family homes were steady throughout the New York City metropolitan area in July. However, homebuilders in northern New Jersey report that sales of new moderately-priced homes picked up noticeably in late August and early September; contacts also report that home remodeling activity remains exceptionally strong.
In upstate New York, new home construction remained at depressed levels in July, but sales and prices of existing homes rose sharply. While it is too early to tell if this is the start of a trend, even a moderate rise in demand may have a significant impact on the market, given the dearth of new construction in the past two years.
Other Business Activity
A major New York City employment agency specializing in office jobs reports that the labor market is "tremendously tight" and has grown progressively stronger over the past few months; last month was characterized as the "best August in our history". Still, consumer confidence in the Middle Atlantic states (New York, New Jersey, and Pennsylvania) remains well below the national average, after holding steady in August. A recent survey of large employers across the New York metropolitan area shows projected 1997-98 salary increases averaging 4.1 percent, about the same as in 1996-97. Tourism remained strong in July—although hotel occupancy rates edged down on a seasonally adjusted basis, room rates continued to run 10 percent above comparable 1996 levels.
Interest rates on all types of loans declined over the last two months, but deposit rates were mostly higher. Credit quality, as measured by delinquencies, was stable to slightly improved. In particular, delinquencies on commercial and nonresidential mortgages were down, while consumer and residential mortgage delinquencies were roughly stable.