March 17, 1999 Federal Reserve Districts Second District - New York

Skip to content Summary Districts Boston New York Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco Full report

The District's economy continues to grow at a brisk pace with only scattered signs of price pressures. Retailers report that sales were above plan in both January and February, with somewhat less discounting than last year on winter clearance merchandise; inventories were said to be satisfactory, albeit on the low side. The housing market has retained strong upward momentum in early 1999, with noteworthy improvement in upstate New York. After slowing in the fourth quarter, Manhattan office rents resumed their 15-20 percent rate of increase in January, as vacancy rates fell to cyclical lows. Regional purchasing managers report a rebound in manufacturing activity in February, along with steady to declining commodity prices but a re-emergence of sharp upward price pressures for contracted services. Final costs of most goods and services remain stable, though there are scattered reports of hikes in restaurant prices and movie admissions. New York State payroll employment levels for both 1997 and 1998 were boosted considerably after recent benchmark revisions. Local banks report continued strong loan demand, leveling off in credit standards, and further declines in delinquency rates. Consumer Spending Retailers report that sales were generally above plan in both January and February. Most contacts report strong demand at clearance sales in January and brisk sales of spring merchandise in February, helped by mild weather. Among retailers, discounters continued to register the strongest sales gains compared to a year earlier, ranging from 4 to 9 percent, on a same-store basis; general merchandise chains reported more modest gains. Most sales categories performed well, though some contacts note lagging sales of toys, athletic footwear and accessories, and electronics. Inventories are mostly reported to be in good shape--none of the contacts indicate that they are too high, but one large chain says that inventories are too lean in certain categories. All of the retailers surveyed indicate that they and their major vendors are Y2K-compliant, and say they have no plans to accumulate extra inventories later this year. Most retailers indicate steady wages, though one large chain reports that it is going to "bite the bullet and raise pay scales" this year, largely in response to rising turnover. Retailers indicate that prices of most goods are flat to somewhat lower; although ticket prices for apparel are lower than a year ago, some contacts note less aggressive markdowns than last year, thanks to strong demand at clearance sales. While prices of most goods and services remain stable, there are scattered reports of increases in restaurant and movie prices this winter in and around New York City. Construction & Real Estate The District's housing market showed further signs of strength in recent weeks. Single-family housing permits marginally exceeded last January's exceptional pace (despite snowstorms in western New York), while multi-family permits "mainly in New York City" were up 30 percent from a year ago; both segments were also strong in December. More currently, homebuilders in New Jersey report persistently heavy buyer traffic and sales in February and early March. Builders in New York State say that the market is strong and improving; even most parts of chronically sluggish upstate New York have improved substantially "notably the Rochester and Albany areas." Remodeling contractors in both New York and New Jersey say they "have more jobs available than they can possibly do." Remodelers in Long Island and northern New Jersey report "numerous jobs in the six-figures." One New Jersey realtor described current market strength as "amazing." Similarly, New York State's market for existing single-family homes continued to be brisk in December and January, with sales up 8 percent from a year ago, led by the Syracuse, Rochester and Albany areas. Statewide, home prices were up more than 7 percent from a year earlier in January. New York City's office market regained momentum in January, after slowing in the fourth quarter. In Manhattan, office availability rates fell to cyclical lows in January, while office rents resumed a steep uptrend. In the suburbs of Albany and Rochester, office vacancy rates fell to all-time lows of 2-3 percent in late 1998, while rates in suburban Syracuse and Buffalo were about double that; rates in the central business districts, however, continued to be a good deal higher. Other Business Activity Benchmark revisions to state payroll employment produced little change in New Jersey, but boosted New York State employment levels by roughly 1 percent in both 1997 and 1998. About half of the upward revision was in government (which had reportedly been undercounted going back to 1993); the other half mainly accrued to finance, construction and various services. Regional purchasing managers surveys indicate a strong rebound in manufacturing in February, following a January slump. New York City area purchasers report that manufacturing improved sharply in February; they also note continued strength in nonmanufacturing activity. While prices paid for goods were flat to slightly lower, significant price pressures for contracted services re-emerged in February, led by computer and architectural services. Buffalo purchasing managers report a modest pickup in local manufacturing in February, with improvement in new orders and production but continued declines in employment; commodity prices were reported to be down noticeably in February. New York City's tourism boom appears to have leveled off--hotel occupancy rates were somewhat lower than a year ago in January, while daily room rates registered a larger-than-normal seasonal decline and were up just 5 percent from a year ago. Albany-area hotels registered an increase in occupancy rates over the past year, despite a substantial expansion in the number of hotel rooms. Over the past year, there has been a sizable decline reported in the number of Canadians making day trips to the western New York State and an increase in New Yorkers visiting Ontario. Financial Developments According to a survey of senior loan officers at small- and medium-sized banks in the Second District, overall loan demand has increased in the past two months--particularly for residential and nonresidential mortgages, as well as for commercial and industrial loans. Refinancing activity turned down over the past two months. Bankers appeared more willing to lend than they were two months ago, and credit standards, which had been tightened through most of 1998, remained stable. Interest rates on residential and nonresidential mortgages remained unchanged since the last survey, while consumer and commercial loan rates fell. Average deposit interest rates decreased over the past two months, as over half of the bankers surveyed reported lower deposit rates. Delinquency rates decreased for all types of loans, indicating continued improvement in the quality of credit. Return to top Boston Philadelphia