‹ Back to Archive Search

Beige Book Report: New York

September 8, 1993

On balance, economic developments seemed slightly more positive in recent weeks, although some negative reports continued to be received. Sales results varied widely at District retail stores during July and early August Respondents reported no noteworthy change in homebuilding activity in recent weeks, and now expect housing starts to top last year's relatively low levels, though not by much. In the commercial real estate market the sale of a nearly vacant new office building in mid-Manhattan reportedly elicited more interest and sold for a higher price than many had expected. New York's unemployment rue decreased to 7.5 percent in July from 7.8 percent while New Jersey's rate held steady at 6.9 percent Most senior loan officers surveyed at small and midsized banks indicated no recent change in their willingness to lend.

Consumer Spending
Sales results varied widely at District retail stores during July, and early August data indicated a continuation of this pattern. Fans and air conditioners were strong sellers in July as most of the District experienced record-high temperatures, and other items for the home also fared well. Sales of women's apparel and cosmetics were strong at some stores but quite weak at others. Some retailers attributed their lower apparel sales to the fact that they had smaller-than-usual stocks on bend for this year's July summer clearance.

Over-the-year sales changes ranged from -14 percent to +18 percent but despite several negative results, only one chain stated that inventories were somewhat worrisome. Stores were fairly evenly divided between those falling below and those exceeding plan. One chain with lower-than-expected results had moved a large promotional event from July to August and apparently underestimated the impact this would have on July sales. Several respondents were cautiously optimistic about the outlook, citing a continued lack of consumer confidence as the reason for their caution.

Residential Construction and Real Estate
Respondents report essentially no change in homebuilding activity in recent weeks. Some nosed a slight slowing of traffic and sales but stressed the fact that traffic has exhibited an up and down pattern over a period of time. The IBM layoffs have begun to have a negative impact in the Hudson Valley area, however, with an increasing number of homes being added to the resale market. Uncertainty about the economic outlook and concern about job security were factors mentioned as continuing to dampen demand for new homes in several other parts of the District as well. Low interest rates and stable home prices are sustaining some demand, however, and credit seems somewhat more available than had been the case, particularly for large builders. Housing starts are expected to top last year's relatively low levels throughout the District though not by large amounts.

In the commercial real estate market the recent sale of a 42-story, nearly vacant new office building in mid-Manhattan reportedly elicited more interest and sold for a higher price than many had expected. The buyer, Morgan Stanley, noted that a number of its businesses have been growing and that the new building will fit in with its expansion plans. Some other financial services firms in Manhattan also have already increased or plan to increase their space when negotiating new leases.

Other Business Activity
New York's unemployment rate decreased to 7.5 percent in July from 7.8 percent in June while New Jersey's rate held steady at 6.9 percent, just above the national average. While employment has continued declining in the District, the recent pace has been modest. Moreover, a recent BLS report noted that, despite its employment doldrums. New York City wages and salaries grew by a sizable amount in 1992 even when the highly-paid Wall Street firms are excluded. New York State payrolls also rose in 1992, though by a smaller amount.

The July surveys of purchasing managers in Buffalo and Rochester indicated some improvement among manufacturers in those areas. Rochester had a sizable increase in the percentage of firms stating that general business conditions were better 38 percent in July from 20 percent in June. A higher percentage of Buffalo firms reported a rise in output in July and, though the percentage with a gain in new orders fell, the percentage with the nine or increased new orders rose.

The District's employment outlook was dimmed by several announcements of future job reductions. The largest of these were IBM's planned cutback of another 35,000 and Kodak's additional downsizing of 10,000. Smaller cutbacks of 3000 and up to 1500 are in the offing for Johnson and Johnson and New York's Empire Blue Cross. Most of these numbers pertain to worldwide operations and no information is currently available as to the local impact. On a smaller scale, Martin Marietta will cut almost 500 Albany-area jobs and will decide by October whether to close any of several other plants in New York which it acquired in its recent purchase of GE's aerospace division.

Financial Developments
Most senior loan officers surveyed at small and midsized banks in the District indicated that they are as willing to lend as they were two months ago. Loan rates decreased slightly in the last two months as roughly half of the surveyed loan officers reported moderately lower rates while the rest reported theirs unchanged. Overall loan demand was reported to be generally stable. Approximately three- fifths of the respondents reported steady demand while the remainder was evenly divided between those with higher and lower demand. With regard to specific categories, most surveyed loan officers reported that demand for consumer loans was unchanged and that mortgage demand and refinancing activity remained stable over the last two months. Business loan demand showed continued signs of sluggishness as two-thirds of the respondents indicated stagnant demand while others noted only slight increases or decreases. In addition, approximately 90 percent of respondents reported either no change or a moderate decline in loan delinquency rates during the last two months.