March 2, 2011
Federal Reserve Districts
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The Second District's economy appears to have expanded at a modest pace since the previous report. Business contacts in most industries report stable to improving conditions and express widespread optimism about the near-term outlook. Labor market conditions have been mixed but generally steady, on balance: T here has been little or no net hiring in the financial and manufacturing sectors, but a slight pickup in some other sectors. Retail sales are characterized as relatively strong in early 2011, despite inclement weather, and consumer confidence has continued to improve. However, tourism activity has shown signs of slowing by more than the seasonal norm in early 2011. Commercial real estate markets remain fairly slack: The market for office space has been generally stable, while the market for industrial space has softened somewhat. Housing markets have been mostly stable, with scattered signs of improvement. Finally, bankers report strengthening demand for commercial loans and mortgages but weaker demand for home mortgage loans; they also indicate little change in credit standards and steady to lower delinquency rates.
Auto dealers in upstate New York report that sales of new vehicles continued to trend upwards in early 2011, as lean inventories of used cars have nudged up prices and spurred demand for new models. Dealers in the Rochester and Buffalo areas report that sales of new autos were up 10-20 percent from a year ago in January, with reports of particular strength for domestic brands. Both retail and wholesale credit conditions continued to improve. Service departments also report fairly brisk business, aside from a brief slow patch in early January. One industry contact notes that a recent auto show in western New York State drew strong traffic. Dealers are generally optimistic about the sales outlook for 2011.
Confidence surveys suggest that consumers are in somewhat better spirits. Siena College's survey of New York State residents shows confidence surging to its highest level since 2007, with good gains both upstate and downstate. The Conference Board reports that consumer confidence among residents of the Middle Atlantic states (NY, NJ, Pa) edged down from a 3-year high in January but remains near the upper end of its recent range.
On a less positive note, tourism activity in New York City registered more than a normal seasonal slowdown since the beginning of the year, though the overall level of activity remains fairly high. Occupancy rates at Manhattan hotels in January were somewhat lower than a year earlier, while revenues held steady, reflecting moderate increases in room rates. In the first half of February, however, revenues have been running a bit lower than comparable 2010 levels--if this persists for the full month, it would be the first 12-month decline in revenues since 2009. Broadway theaters report that, after a brisk December and early January, both attendance and total revenues tapered off noticeably around mid January and have been running roughly 10 percent lower than a year earlier over the past few weeks--in part because a number of shows have closed.
Construction and Real Estate
Commercial real estate markets generally remain slack--the market for office space has been mixed but mostly stable in recent weeks, while the industrial market has shown further signs of softening. In New York City, office leasing activity has remained fairly brisk, but this has been more than offset by additional space coming onto the market; as a result, vacancy rates edged up in January. Asking rents on Class A properties did edge up in January but were still down nearly 10 percent from a year earlier. Elsewhere across the region, office vacancy rates edged down in northern New Jersey and across much of upstate New York but rose modestly in Long Island and in Westchester and Fairfield Counties. Industrial markets showed further signs of softening across much of the District. Long Island's industrial vacancy rate rose to its highest level in more than a decade, and rents drifted down. In northern New Jersey, industrial vacancy rates held steady, but rents slipped to multi-year lows. Across upstate New York and in Fairfield County, vacancy rates and rents were little changed.
Other Business Activity