September 8, 2010
Federal Reserve Districts
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On balance, the Second District's economy showed signs of decelerating since the last report. Input prices have continued to rise moderately, while consumer prices appear to be steady to down slightly. General merchandise retailers report that sales have slowed since the last report, though auto dealers categorize sales as fairly good. Commercial real estate markets have generally been steady to softer since the last report. Residential real estate sales markets weakened to very low levels, though New York City's rental market continued to improve modestly. Manufacturing-sector contacts report some further deceleration in business activity. Tourism activity in New York City has been steady at a strong level since the last report, buoyed by rising business travel. Overall, the labor market, though still slack, has shown further modest signs of improvement. Finally, bankers report steady to weaker loan demand, steady to higher delinquency rates and some tightening in credit standards, but also some narrowing in loan spreads.
Auto dealers in the Rochester area report that sales of new autos were down roughly 10 percent from a year ago in July and down 15 to 20 percent in the first half of August, while Buffalo-area dealers report a 5 percent year-over-year increase in July and project a moderate decline in August. Still, contacts in both areas describe the current sales pace as fairly good, with the 12-month comparisons depressed by last summer's "Cash for clunkers" program. Dealers report that both retail and floor-plan credit conditions have continued to improve.
Tourism activity in New York City has been steady at a strong level since the last report. Manhattan hotels report that occupancy rates remained close to 90 percent in July and August, even as the number of hotel rooms has risen by more than 5 percent over the past year. Moreover, room rates continued to run 10-15 percent ahead of this time last year. Business travel has reportedly increased in recent months, accounting for a growing share of revenues. Broadway theaters report that attendance picked up a bit in the latter part of July and remained brisk in August--up roughly 5 percent from a year earlier, though the average ticket price was down 4 percent in August from comparable 2009 levels. Overall revenues were up moderately from a year earlier in July but flat in the first three weeks of August.
Construction and Real Estate
In New York City, conditions were more mixed. Activity in the city's co-op and condo market has fallen off by somewhat more than the seasonal norm in July and August, following a brisk second quarter; activity has dropped off particularly sharply on Long Island and, in general, at the lower end of the market. A leading appraisal firm reports that prices remain essentially flat in Manhattan and across New York City generally. The appraisal business has reportedly remained strong. Manhattan's rental market, though still somewhat slack, has continued to recover: rental activity has remained stable at a moderate level, while effective rents have rebounded--contract rents have risen only modestly, but landlords are offer fewer concessions (i.e. fewer months free rent). A considerable volume of new development will be coming onto the market, probably largely as rentals, in the months ahead.
Office markets across the District were generally steady to weaker since the last report. Vacancy rates were steady throughout most of the District, though they increased modestly in Manhattan and the Albany area. Asking rents were also little changed overall; they edged up in the Long Island and Syracuse areas but edged down in the northern New Jersey and Albany markets. Asking rents are still down sharply from a year ago in Manhattan and down moderately in Long Island and northern New Jersey; however, rents are up from a year ago in the Buffalo, Syracuse and Albany areas. Industrial markets were also steady to weaker across the District since the last report. Industrial vacancy rates rose modestly across the New York City metro area and held steady in the Buffalo and Rochester areas. Asking rents were generally down 3-4 percent from a year ago.
Other Business Activity
A major NYC employment agency, specializing in office jobs, reports that, while the job market is difficult to gauge during the slow summer season, market conditions appear to be improving gradually and conditions are not as dire as last summer. The pool of available candidates is not as large as it was last summer; however, some people who had given up looking are starting to come back.