March 5, 2008
Federal Reserve Districts
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The Second District's economy has softened since the last report. Manufacturers report substantial weakening in business activity as of mid-February. Port activity is also reported to be weaker, while, more generally, contacts outside the manufacturing sector report deterioration in business activity and a pullback in hiring. Retailers indicate that sales have been below plan thus far in 2008, though inventories are reported to be at satisfactory levels. Tourism activity in New York City has shown some signs of slowing in recent weeks but remains strong. Housing markets continue to be sluggish, though Manhattan's co-op and condo market has shown some resilience. Manhattan's office market remains tight, but vacancy rates have edged up and rents have decelerated. Finally, bankers report some continued weakening in demand for new loans but a pickup in refinancing activity; respondents also report ongoing tightening in credit standards and rising delinquency rates, particularly on non-residential mortgages.
Tourism activity in New York City slowed a bit in early 2008 but was still at a high level. Hotel occupancy rates were reported to be roughly on par with a year earlier in January and early February; prices and total revenues decelerated slightly but were still up 10-12 percent from a year earlier. Broadway theaters report that attendance has been fairly strong in January and early February, rising 3-4 percent from a year earlier; however, total revenues were up just 1 percent, reflecting a decline in the average effective ticket price.
Construction and Real Estate
Housing markets in the District have generally weakened since the last report. New Jersey's housing market is reported to have seen a decline in transactions, with large gaps between asking prices and offers. The inventory of available units remains high but has retreated somewhat, as some sellers have taken their homes off the market. Builders have curtailed most new construction projects; one industry expert cites as a major problem the fact that prices for redevelopment land have not come down in line with home prices.
Manhattan's co-op and condo market is reported to have remained fairly stable in early 2008, with transaction activity roughly on par with a year ago, and prices up by about 5 percent. There was a normal seasonal increase in the inventory of units on the market in January.
Other Business Activity
New York State manufacturers report that business activity weakened noticeably in January and early February, while employment weakened moderately. Firms also report more widespread increases in prices paid than in well over a year. More than two in five manufacturing contacts indicate that their customers have become slower in paying their bills in recent months, and more than one in five say that they have grown slower in paying their vendors. Port of New York import traffic has reportedly slowed noticeably in early 2008. More generally, non-manufacturing firms in the District report widespread weakening in both general business activity and net hiring activity in January and early February. Firms have also scaled back capital spending plans somewhat.