September 9, 2009
Federal Reserve Districts
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The Second District's economy has been generally stable since the last report. The labor market remains soft with some signs of gradual improvement. Manufacturing sector contacts report some pickup in activity and remain optimistic about the near-term outlook. Auto dealers report a pickup in sales activity in recent weeks, but general merchandise retailers indicate that sales have remained fairly sluggish and well below 2008 levels, though on or close to plan. Consumer confidence improved slightly in August but is still at a low level. Tourism activity in New York City has been steady since the last report, though business travel is said to be down markedly.
Commercial real estate markets have been steady to somewhat weaker since the last report, while industrial markets have been stable. Housing markets in northern New Jersey and upstate New York have shown some signs of picking up, especially at the lower end of the market; however, the purchase and rental markets for New York City apartments continued to weaken, led by the high end. Finally, bankers report rising delinquency rates across all categories of loans, as well as some further weakening in loan demand and continued tightening in credit standards.
Consumer confidence among residents of the Middle Atlantic states (NY, NJ, Pa) rose modestly in August, according to the Conference Board, but remains at a low level and below the nationwide average. Tourism activity in New York City has been weak but stable since the last report. Manhattan hotels report that occupancy rates remained in the mid 80s in July and early August--down only modestly from a year earlier. However, hotel room rates continue to run 25 to 30 percent below comparable 2008 levels--largely attributed to a shift from business travelers to leisure visitors, who tend to be more price sensitive. Broadway theaters report that attendance has held relatively steady since the last report, continuing to run about 10 percent lower than a year earlier; however, the average ticket price is up about 16 percent, keeping total revenue moderately ahead of year-ago levels in August.
Construction and Real Estate
The housing market has shown scattered signs of a pickup in parts of the District, though conditions have continued to weaken in New York City. A New Jersey contact notes signs of a mild pickup at the lower end of the resale market--helped by the homebuyer tax credit--but maintains that sales and starts of new homes remain flat at low levels. Prices are said to have firmed slightly in New Jersey's resale market, though they remain substantially lower than a year ago. Similarly, Realtors across New York State report that prices rose in July but are running well below comparable 2008 levels.
In contrast, New York City's multi-family market has continued to weaken. Manhattan co-op and condo prices have reportedly continued to fall in the current quarter. However, transactions activity, which had been exceptionally sluggish in the second quarter, has reportedly picked up in the current quarter, except at the high end of the market, where activity has evidently been constrained by tight credit. Prices of newly-constructed condominiums, which are mostly at the high end of the market, have been discounted steeply, reflecting a large inventory. The apartment rental market has also continued to deteriorate, especially at the high end: overall, asking rents are reported to be down 6 to 10 percent from a year earlier in August; moreover, landlords are typically waiving commissions and offering concessions, such as 1-2 months free rent.
Other Business Activity
More broadly, business contacts across all industries, including manufacturing, report that employment continues to decline, but to a less widespread degree than in the first half of this year; moreover, a growing proportion indicate that they expect to increase employment at their firms in the months ahead. In assessing business conditions generally, both manufacturers and other firms report a pickup in activity for the first time in more than a year. Moreover, a growing proportion of both groups say they are optimistic about the business outlook. Firms across most sectors continue to report increases in prices paid but modest declines in prices received.