December 1, 2010
Federal Reserve Districts
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The Second District's economy has continued to expand since the last report, with noticeable improvement in the labor market, while prices have remained stable. Non-manufacturing contacts overall report steadily improving business conditions, whereas manufacturing-sector contacts report a recent pullback in activity; even so, respondents in both sectors indicate that they continue to add workers, on balance, and plan to do so in the months ahead. Similarly, a major employment agency notes some pickup in hiring activity. General merchandise retailers report that sales have improved steadily in October and early November, while auto dealers continue to report fairly good sales results. Tourism activity in New York City has shown signs of picking up in recent weeks. Consumer confidence has also moved up modestly. However, commercial and residential real estate markets have been steady to softer since the last report. Finally, bankers report steady loan demand, tightening credit standards, and some increase in delinquency rates on home mortgage loans.
Tourism activity in New York City has been strong since the last report. Manhattan hotels report that occupancy rates continued to hover around 90 percent in October and remained higher than a year ago in November; room rates continued to edge up since the last report and were running 7 to 8 percent ahead of a year ago. While leisure visits to New York City are described as steady and robust, business travel has strengthened steadily. Broadway theaters report a pickup in both attendance and total revenues in late October and early November: after a dip in September and early October, business is, once again, running ahead of a year earlier.
Consumer confidence, though still at low levels, has improved modestly since the last report. The Conference Board reports that consumer confidence among residents of the Middle Atlantic states (NY, NJ, PA) rose in September and October, reversing a decline in August. Similarly, Siena College's latest survey of New York State residents shows confidence rising to its highest level since May both upstate and in the New York City area.
Construction and Real Estate
Activity in New York City's co-op and condo market has slipped by a bit more than the seasonal norm in October and early November, particularly at the lower end of the market, though a recent flurry of activity is reported at the very high end (homes in the range of $8 million or more). Prices remain stable across the spectrum. While the number of new condos under construction has declined modestly, there continues to be a substantial inventory of unsold, completed units. Manhattan's rental market has reportedly softened a bit since the last report. Rents remain stable, but landlords are, once again, offering concessions (such as one or more month's free rent), though these discounts are not as steep as in 2009. A substantial amount of new housing in the pipeline is likely to be offered as rentals.
Office markets across the District have been steady to slightly softer thus far in the fourth quarter. Asking rents held steady in Manhattan and slipped in northern New Jersey, Long Island and Rochester but rose modestly in Westchester and Fairfield counties and in Buffalo. Vacancy rates have been steady to modestly higher since the last report. Sales of commercial properties remain sluggish, and a contact in upstate New York reports that commercial construction activity remains at depressed levels.
Other Business Activity
On the other hand, manufacturing activity has weakened, on balance, as a number of firms saw slower activity and fewer contacts reported improvements. Yet these contacts continue to report that they are increasing employment, on balance, and they are increasingly optimistic about the near-term outlook. Also, manufacturing contacts indicate that they are currently holding somewhat higher cash balances than usual, and a sizable proportion of contacts indicate that they plan to increase cash holdings over the next year. Both manufacturers and other firms report moderate increases in prices paid but little or no change in their selling prices.