Beige Book Report: New York
June 23, 1993
On balance, the pace of economic activity in the District seemed somewhat slower in recent weeks but the outlook remains modestly favorable. While retail sales results varied widely during April and May, a majority of contacts reported sales were under plan. Homebuilding activity slowed somewhat in parts of the District and the earlier optimism about surpassing last year's level of starts was less pervasive. Office leasing activity picked up in recent weeks, however, and primary vacancy rates declined in much of the District. New Jersey's unemployment rate fell sharply in May while New York's rate rose. Recent discussions with 26 manufacturing firms indicated a modest increase in sales is anticipated over the next six months. Small and midsized banks in the District reported no change in their willingness to lend.
Consumer Spending
While sales results varied widely at District retail stores during
April and May, a majority of contacts reported that sales were
somewhat below plan. They attributed this in part to cool and rainy
weather during much of the period and also to a continued
cautiousness on the part of consumers due to economic uncertainty.
Some retailers noted a pickup in sales towards the end of May and
into early June, however.
Over-the-year sales changes ranged from -4 percent to +10 percent in April and from -5 percent to +2.5 percent in May. Because Memorial Day was celebrated a week earlier last year, several respondents noted that promotionals associated with that holiday will benefit June this year instead of May. While the weather continued to put a damper on the sale of summer apparel, other types of apparel such as sportswear and children's wear sold well. Demand for furniture, appliances and other home items was also strong.
Despite somewhat disappointing sales, most retailers reported that inventories were at satisfactory levels. However, two stated that stocks were somewhat bloated and that some paring was necessary.
Residential Construction and Real Estate
Homebuilding activity slowed somewhat in parts of the District and the earlier optimism about surpassing last year's level of starts was less pervasive. Factors cited were continuing layoffs and uncertainty about jobs and probably higher taxes. Apparently sales to first-time homebuyers have been good, but trade-up demand has slowed in several areas. Although still high, lumber prices have started to decline and builders state that credit has become more available for construction loans. Funds remain very scarce for acquisition and development loans, however.
Office leasing activity picked up in recent weeks and primary vacancy rates declined in much of the District. The largest decline- -reportedly almost one percentage point--occurred in downtown Manhattan where a major securities firm renewed an existing lease and rented a substantial amount of additional space as well. Despite the recent, widespread improvement, however, office vacancy rates remain at very high levels throughout the District.
Other Business Activity
New Jersey's unemployment rate fell sharply to 7.4 percent in May
from a very high 9.1 percent in April while New York's rate rose to
7.5 percent from 7.0 percent. New Jersey's 130,000 increase in
household employment was 15 percent of the national increase of
857,000. (Several published reports mistakenly compared the 130,000
to the nationwide payroll employment rise of 209,000 and stated that
New Jersey accounted for more than half the nation's gain.)
Among recent announcements concerning the District, Bausch and Lomb plans to erect a new headquarters office tower in downtown Rochester and a $25-40 million medical complex will be constructed in Buffalo. On the negative side, New York Telephone will lay off 600 managers next September and Readers Digest will reduce its headquarters staff by 250 over the next 15 months. April reports from purchasing managers in Buffalo showed an improvement in production but a slight decline in new orders. In continuation of a recent up and down pattern, a much smaller percentage of Rochester purchasing managers reported better general business conditions in April than in March.
Discussions were recently held with 26 manufacturing firms in the District regarding sales, prices, wages, investment plans and exports. On the whole, our contacts anticipate a modest increase in sales over the next six months. Twenty expect sales to be flat or increasing while four anticipate declines of 5 percent or more. There was no evidence of inflationary pressures. Only three firms plan to raise their prices over the next six months and more than 20 said wage increases will be the same or lower than last year. Only one firm reported a noticeable increase in the cost of materials. More than half the firms plan to reduce capital spending, four significantly. More than two thirds expect exports to continue growing at the same rate or faster over the next six months.
Financial Developments
The latest survey of small and midsized banks in the Second District
showed that loan officers' willingness to lend was unchanged during
the last two months after four months of increased willingness. Most
officers reported that their loan rates have remained stable.
Overall loan demand was unchanged to somewhat higher from two months
ago. Demand for residential mortgages was unchanged as refinancing
activity leveled off.
Respondents noted some growth in overall deposits over the past year. Savings accounts increased as customers shifted funds from maturing certificates of deposit to passbook savings. Delinquency rates for all types of loans remained unchanged during the preceding two months.