Beige Book Report: New York
May 8, 1984
Introduction The slowdown in the national economic recovery suggested by the leading indicators and unemployment rates was not reflected in reports from the Second District for March and April. Business activity continued to expand in most sectors throughout the District. Several purchasing managers report very favorable conditions and the unemployment rate in New York reached a four-year low. The demand for homes is very strong and builders expect to be busy until the end of the year. Nonresidential construction is also strong with especially tight space availability in some parts of the District. Consumer spending did slow in March, and despite a sharp recovery in April, several retailers report excess inventories. On the financial side, banks have begun offering two new types of consumer loans: variable rate installment loans and equity access accounts.
Consumer Spending
Retail sales in the Second District were weak in March but rebounded
In April. Two retailers located in New Jersey registered sales lower
in March than last year, and several store chains reported very
small increases. In contrast, consumer spending rose sharply in
April throughout the District, to amounts ranging from 11 to 26
percent higher than those of last year. bad weather in March, good
weather in April, and an Easter holiday three weeks later than last
year were common explanations for this pattern.
The increase in April sales was not enough to prevent excess inventory build-up for a number of retailers in the course of the past few months. Several stores have accumulated merchandise 20 or 30 percent over last year's levels. While much of the inventory growth was intentional, levels at some stores were up to 10 percent higher than planned. Some retailers plan to reduce stocks by cutting back or canceling orders, but others expect increased sales to absorb excess inventory.
Business Activity
The business expansion in the Second District maintained its pace in
recent weeks. Purchasing managers in upstate areas reported quite
favorable economic conditions, and the percentage of managers in the
Buffalo area citing increases of new orders reached the highest
level in six years. Downstate, improved economic conditions made
possible a New York City budget proposal calling for substantially
higher levels of public employment.
Further employment gains were registered in many areas of the District. March nonagricultural employment in New York State increased broadly to a record level for that month, and the unemployment rate fell below 7 percent for the first time in four years. The greatest improvements were in the construction, trade, service, and financial industries. Manufacturing employment also rose as a pickup in business capital outlays led to increased employment in the electrical and nonelectrical machinery industries.
Among major new construction projects in the District, two of the largest were the groundbreaking for a new 300-room hotel and convention center in the Albany area, and a planned office building and hotel near Giants Stadium in New Jersey. Other large expansions include an additional building at IBM's Kingston, New York complex, increased space at a dairy plant, and the enlargement of its headquarters building by a microwave firm.
Construction and Real Estate
Residential construction activity was brisk throughout the District
despite occasional interruptions due to unseasonably wet weather.
Demand is very strong and builders anticipate being booked through
November. Because of anxiety over the future course of interest
rates, New York and New Jersey builders are considering issuing
"builders bonds" to finance mortgagee themselves, in order to assure
a stable flow of funds next year.
Nonresidential real estate activity also picked up a bit in recent months. The strength in the Manhattan office market, which has recently been confined to older buildings, is extending to new, higher-priced office space. Demand is also up in New Jersey and lower Connecticut, but remains fairly slow in the northern suburbs of New York. On Long Island, despite fears of large electricity rate hikes, the industrial market was especially tight. The amount of available industrial space fell by nearly 25 percent in the six months ending in March.
New office buildings are planned or starting both in New York City and in suburban areas. Construction of retail space, especially "strip centers" along major roads is up on Long Island.
Financial Developments
Small Second District banks are offering two relatively new consumer
financial instruments, variable-rate consumer installment loans and
equity access accounts. Most banks surveyed now offer variable-rate
consumer loans. Monthly payments are generally fixed for the term of
the loan, and quarterly rate adjustments are incorporated by
changing the number of payments. The response to these loans has
been quite good; the banks reported that up to 80 percent of
consumer loans are now of the variable rate variety.
Equity access accounts are mortgage loans that can be accessed like lines of credit. They are being offered by fewer banks and demand for these accounts appears to be fairly weak.