May 6, 1992
Reports on recent developments in the District remain basically mixed but with a more positive tone about the outlook than in recent months. District homebuilders noted increased buyer interest and office leasing activity continued at a moderate pace. District unemployment rates fell in March. March sales results varied widely at District department stores while the surveys of purchasing managers in Buffalo and Rochester moved in divergent directions. Most loan officers at small and midsized banks indicated no change in their willingness to lend from two months earlier.
Consumer Spending
Sales results at District department stores varied widely during
March from sizable over-the-year declines to sizable over-the-year
gains. Year-to-year changes ranged from -13 percent to +13 percent
and from somewhat below to substantially above plan. However, most
contacts stressed the difficulty of evaluating their results because
of the different Easter dates this year and last. In addition,
several chains hold major spring promotional events which shift from
year to year between March and April.
For the first time in many months several respondents cited furniture and various kinds of home furnishings as the best-selling items in March. Men's and women's apparel sales were mixed. Inventories at the end of March were generally on or slightly below plan.
Groundbreaking is scheduled for the first week in May at a long- delayed shopping mall on Long Island and plans were announced for construction of a three-level, glass-enclosed mall in the Bronx close to the huge Co-op City apartment complex. Two major department store chains have agreed to be the anchors at the Bronx mall.
Residential Construction and Real Estate
District homebuilders report increased buyer interest during recent
weeks which they attributed to lower mortgage rates and two years'
worth of pent-up demand. Attendance at spring home shows has been
greater than in 1991 and in many areas sales of new and existing
homes are relatively strong. As a result builders are more
optimistic about the housing market than they have been in quite
awhile and definitely expect sales in 1992 to be stronger than last
year's. A regional builders' association is projecting an increase
in New York State housing starts this year of about 12 percent from
their record-low 1991 level.
Office leasing activity continued at a moderate pace in recent weeks as firms took advantage of lower rents and other concessions in newer buildings to upgrade their quarters. Nevertheless, office vacancy rates rose during the first quarter in several areas including northern New Jersey, Westchester County, and Fairfield County (Connecticut). Corporate restructuring, moves out of the region, and, in New Jersey, a sizable amount of new construction, were major factors putting upward pressure on vacancy rates. Despite these trends, vacancy rates on Long Island and in downtown Manhattan showed some improvement.
Other Business Activity
District unemployment rates fell in March, reversing their February
increases. New York's rate dropped to 8.0 percent from 8.9 percent
in February while New Jersey's declined to 7.1 percent from 7.6
percent in February. Against March's improved unemployment rates,
the regional Bureau of Labor Statistics commissioner recently stated
that, between April 1989 and February 1992, job losses in New York
State totaled 500,000, the state's most severe contraction on
record. In recent months, however, job losses in both New York and
New Jersey have slowed.
The March surveys of purchasing managers in Buffalo and Rochester were mixed. An increased percentage of Rochester firms reported better business conditions whereas in Buffalo fewer firms reported an improvement in new orders and production. In both areas, however, as has persistently been the case, the majority of firms reported stable to improved conditions. The percentage of firms noting higher input prices declined in both areas.
A recent favorable development was New York City's announcement that it will end this fiscal year with a surplus rather than the previously projected deficit. Due in part to record profits on Wall Street, revenues were higher than expected. Also reflecting the improvement on Wall Street, investment banks have reportedly hired twice the number of MBAs as in 1991. New York City's economy is also getting a boost from the largest number of Broadway shows in recent memory, several of which are sell-outs.
Financial Developments
Most senior loan officers surveyed at small and midsized banks in
the Second District indicated that they are as willing to lend as
they were two months ago, although a few respondents did report
tightening their credit standards and none reported easing. The
number of banks reporting an increased willingness to make consumer
loans grew slightly, to one quarter of those surveyed, while the
percentage expressing increased willingness to make real estate or
business loans declined relative to the last survey.
Loan demand was reported to be generally stable or somewhat increased. Demand for residential mortgages remained steady, though refinancing activity slowed. Consumer loan demand showed signs of improvement during the period, despite a weakness in the demand for automobile loans. In addition, several respondents indicated an increase in the demand for business loans relative to two months ago. Loan rates largely remained unchanged, although some surveyed loan officers did indicate lowering their rates recently in response to a downward trend evident in the market. A majority of respondents also reported no change or a decrease in loan delinquency rates during the period, which they attributed to their increased internal controls as well as improvements in the economic environment.