July 27, 2005
Federal Reserve Districts
|Skip to content
The Second District's economy has expanded at a somewhat more moderate pace since the last report than in earlier periods. Reports on the labor market have been mixed but, on balance, a bit softer. Retailers generally report that sales were strong in June, though a number indicate some softening in early July. Tourism activity was robust in June. While housing markets continue to be characterized as sturdy, there has been some deceleration in selling prices and a modest dip in activity since the last report. Office markets strengthened moderately in the second quarter, but the market for industrial space was mixed. New York City's financial industry has shown signs of improvement in early July, after a sluggish second quarter; moreover, hiring activity is said to have picked up and compensation has accelerated. Manufacturers and purchasing managers report a considerable diminution of input price pressures in June and early July. Finally, bankers report a pickup in demand for commercial mortgages but little change in other loan categories; they also report some tightening in credit standards and further declines in delinquency rates.
Tourism continued to show strength in June. Manhattan's hotel occupancy rate climbed above 90 percent in June--close to a record high and up more than 3 percentage points from a year earlier; moreover, with average room rates up nearly 18 percent from a year earlier, total revenues are up more than 20 percent over the past 12 months. Similarly, Broadway theaters indicate that attendance remained robust in June, with revenues running roughly 10 percent ahead of a year earlier, though attendance has tapered off moderately in the first half of July.
Consumer confidence improved in June, based on two separate surveys. The Conference Board's survey of Middle Atlantic residents shows consumer confidence rebounding strongly in June, after slipping to a 6-month low in May. Siena College's survey of New York State residents shows confidence climbing for the second month in a row--whereas May's gain was concentrated in the New York City metropolitan area, all of the June gain was in upstate New York.
Construction and Real Estate
Office markets in and around New York City have continued to show signs of strengthening. At the end of June, office vacancy rates declined to 4-year lows in both Midtown and Lower Manhattan, and this improving trend has continued during the first half of July. Similarly, Westchester County's vacancy rate fell to a 5-year low at mid-year, while Fairfield County's rate was down slightly for the quarter. In Long Island, however, vacancy rates rose by nearly a full point in the second quarter, though they are still 1/2 point lower than a year earlier. Industrial markets in and around New York City were mixed in the second quarter. Industrial vacancy rates edged down to near a 3-1/2 year low in Fairfield County and were steady at record lows in Westchester County; rents in both areas were up slightly from a year earlier. In New York City, Long Island, and northern New Jersey, industrial vacancy rates were little changed, though asking rents were up roughly 10 percent from a year earlier.
Other Business Activity
According to our latest survey, New York State manufacturers report a further rebound in activity in early July and have become increasingly optimistic about the near-term outlook. Still, hiring activity is reported to have slowed, and a number of contacts indicate that inventories are higher than desired. They also note a marked deceleration in input prices, and anticipate substantially less upward pressure on prices in the months ahead. Regional surveys of purchasing managers also point to considerable moderation in input price pressures.