Beige Book Report: New York
June 19, 1991
Reports on District developments remain soft to mixed. Sales results were very uneven among District department stores during April and May. Homebuilders are hopeful that an upturn in the existing home market will soon spur increased demand for new homes. Office leasing activity remains somewhat sluggish and vacancy rates have continued to rise. The May unemployment rate rose in New Jersey but edged down in New York. Senior loan officers at small and mid-sized banks reported flat overall demand for consumer loans is moderate to weak.
Consumer Spending
Sales results at District department stores were mixed during April
and May. Some contacts noted an improvement with sales better than
planned while others reported continued sluggishness. Over-the-year
changes in April ranged from -7.8 percent to +5.0 percent and in
May, from -2.0 percent to +6.5 percent with stores fairly evenly
divided as to gains and declines. Women' s clothing and accessories
sold well at most stores in April as did cosmetics and men's
sportswear. Respondents with better-than-anticipated May sales
attributed much of the gain to unseasonably warm weather, noting
that the fastest-selling items were swimwear, weekend wear, sandals
and other summer apparel. The pattern for home furnishings was mixed
in both April and May, with one chain noting a pickup after several
slow months but others experiencing further slackness.
Due to tight monitoring and, in some cases, to better-than-expected sales, inventories are generally at comfortable levels, though one chain reported a level somewhat above plan. Contacts remain cautious about the outlook for consumer spending citing the uncertainties about the course of the economy as well as the possibility that May's strength may represent sales borrowed from June.
Residential Construction and Real Estate
Interest on the part of potential buyers is reportedly strong in
much of the District as a result of lower home prices and mortgage
rates, but apparently its initial effect has been primarily on the
resale market. Homebuilders are hopeful that this upturn in the
existing home market will soon spur increased demand for new homes
from sellers wanting to move up. The New York State Association of
Realtors noted that, for the first time in five years, existing home
sales increased from February to March north of New York City, and
the Buffalo area reported an 11 percent over-the-year increase in
April resales. Recently in Manhattan there were, for the first time,
auctions of condominium and cooperative apartments; in the suburbs,
this technique has been used quite successfully in the past couple
of years to reduce surplus stocks of new single-family homes.
Office leasing activity has remained somewhat sluggish in recent weeks and additional space continues to be marketed due to new completions and further consolidations and restructuring. As a result, office vacancy rates have been rising in many parts of the District. At the end of the first quarter, the vacancy rate in the 15 northern New Jersey counties, for example, averaged more than 22 percent, up almost 4 percentage points from a year earlier. Over- the-year increases of 2 percentage points or more were common in several other areas such as Long Island, Westchester County and Manhattan. Vacancy rates in Manhattan are reportedly at their highest levels since the 1970s.
Manufacturing
Manufacturing firms contacted in the District report continued weak
sales with none anticipating any significant turnaround until late
summer or fall, at the earliest. A producer of construction
equipment sees the weakness spreading as the anemic housing and
government sectors have been joined in recent months by a noticeable
slowing in demand from the auto industry. A small producer of
electric machinery was the only firm reporting a jump in sales, but
the pickup has only been enough to bring sales up to year-ago
levels. Exports were frequently reported to be growing faster than
domestic sales, although more than half of the firms contacted felt
their export growth rate is declining.
Most respondents have lowered their prices in recent months to shore up sales, but none plan to offer large price discounts in the near future. Half of the firms surveyed have reduced their employment levels significantly in recent months in the face of weak demand but plan no further significant layoffs over the coming months.
Other Business Activity
The May unemployment rate rose in New Jersey to 6.8 percent from 6.5
percent in April (seasonally adjusted), but edged down in New York
State to 7.4 percent after a 0.7 percentage point jump in April.
Unemployment rates in the District are no longer below the national
average as they had been for several years and employment has been
growing much more slowly than nationally in recent years. This trend
primarily reflects layoffs and consolidations in New York City and
on Long Island as well as sluggishness in northern New Jersey.
Upstate New York had been registering sizable employment gains until
the recession began. Budgetary problems that continue to plague
local and state governments in much of the District cast a shadow on
the employment outlook. Some 80 New York City workers were recently
notified that they may be laid off by July 1 and both New York State
and New Jersey continue to mention the possibility of cutbacks of
state employees. In an attempt to forestall layoffs as well as
higher taxes, Bridgeport, Connecticut is filing for protection from
creditors under Chapter 9 of the Federal Bankruptcy Code.
The April surveys of purchasing managers in Buffalo and Rochester showed somewhat conflicting patterns. In the Buffalo survey, 84 percent of firms reported stable to improved new orders in April, up from 72 percent in March. In Rochester, however, although fewer firms noted a worsening in April than in March, the 26 percent that did see a deterioration was still almost four times greater than in February.
Financial Developments
Most senior loan officers surveyed at small and midsized banks in
the Second District reported that overall demand for consumer loans
is moderate to weak. The majority of respondents also noted that
demand for consumer installment loans is lower than a year ago. Most
bank officers characterized the growth of automobile, credit card,
and home equity loans over the last three months as slow to flat.
Those banks that typically offer lines of credit on home equity
reported that commitment fees have not changed in the last three
months. Most bankers said current home equity lending is mainly to
new borrowers rather than takedowns on existing credit lines.
The majority of respondents noted a slowdown in payment schedules for all types of consumer loans, though a few stated that the slowing was confined to automobile loans. However, most officers stated that outstanding balances are not rising and indicated that delinquencies are unchanged from three months ago. Several respondents noted some decline in the creditworthiness of borrowers due to high levels of debt, layoffs, and reductions in salaries. Nonetheless, two thirds of all respondents stated that, compared to three months ago, their institution is just as willing to extend credit for consumer installment loans.