Beige Book Report: New York
September 11, 1996
Economic conditions in most sectors of the Second District continued to improve since the last report. Most retailers report that sales rebounded in August and were running on or ahead of plan. Real estate markets strengthened across the board, with demand for both single- and multi-family homes firming throughout the region and New York City's office market tightening further. Purchasing managers in the region report ongoing improvement in the manufacturing sector in August. Private-sector job growth accelerated in July, but public- sector employment fell sharply, mostly due to reductions in the federal summer jobs program. There are no signs of increased price or wage pressures, aside from some firming in real estate values. Finally, banks report a slight softening in demand for commercial and industrial loans.
Consumer Spending
Retail sales in the district were generally on or above plan in
August, as business picked up from July's disappointing pace. On a
year-over-year basis, same-store sales gains ranged from 3-7
percent. Upscale women's apparel and men's casual wear continued to
be the top performers. Home goods were again characterized as
lagging other categories; one contact attributed this ongoing
weakness to relatively cool weather, especially compared to last
summer, which held down sales of air conditioners and other hot-
weather goods. Inventories were generally at desired levels, with
contacts crediting effective control systems, as well as increased
caution after last year's overhang. Expectations for the Christmas
season were mixed, with same-store sales expected to be up 3 to 6
percent from last year.
Retailers report that price and wage pressures remain subdued. Selling prices are said to be flat to slightly higher, while merchandise costs are steady to slightly lower. All contacts report that there is no noticeable wage pressure; most anticipate a modest impact, if any, from the upcoming minimum wage hike.
Construction & Real Estate
New York City's commercial real estate market continued to firm in
July. Office leasing activity accelerated, and availability rates
declined for the second consecutive month. (Availability rates
include vacant space, as well as space coming on the market over the
next six months). Downtown Manhattan's availability rate fell to
23.9 percent-an 18-month low-from 24.7 percent in June; Midtown's
rate edged down to 14.3 percent from 14.5 percent.
The District's residential real estate markets continued to improve in July and August. Homebuilders in New Jersey report that both traffic and sales have picked up in recent weeks, after a sluggish second quarter. Builders in New York report a continued pickup in activity across most of the state, with only the Syracuse and Binghamton areas lagging. Strong demand and thin inventories are reportedly spurring more speculative building activity, mostly in downstate New York (notably Long Island). In general, demand continues to be strongest at the lower end of the market.
Similarly, realtors in both states report strong sales of existing homes, along with moderate price appreciation. New York State realtors report that July home sales were up 18 percent from a year ago, while prices were up 8 percent. In New Jersey, second-quarter sales climbed 13 percent from a year earlier, to their highest level in nearly a decade, with prices up 5 percent. Similarly, Manhattan's co-op and condominium market has been buoyed by rapidly rising rents. One large real estate broker reports that demand for studio and one-bedroom apartments, which had languished for years, has picked up dramatically in recent months, with some buyers bidding above the asking price.
Manufacturing
Regional surveys of purchasing managers suggest continued growth in
the manufacturing sector and a slight easing of price pressures.
Buffalo purchasing managers report that manufacturing activity
resumed a strong pace of growth in August, after pausing in July.
New York City area purchasing managers report continued improvement
in the local manufacturing sector in August, though growth has
slowed from July's torrid pace. (A parallel survey of purchasing
managers in New York City's non-manufacturing sectors signals
steady, fairly robust growth for the third consecutive month).
Other Business Activity
Private-sector job growth in New York, New Jersey and Connecticut
accelerated in July, but reductions in the federal summer jobs
program caused a temporary but sharp drop in public-sector
employment-particularly in New York. New York's unemployment rate
rose 0.2 points to 6.5 percent in July, New Jersey's edged down 0.1
point to 6.1 percent, and Connecticut's edged down 0.1 point to 4.7
percent (a six year low). New York City's tourism boom may be
abating, but only slightly-hotel occupancy rates (seasonally
adjusted) edged down in July, though they remain near record highs,
and room rates are still up more than 12 percent from a year
earlier.
Financial Developments
Commercial loan demand weakened moderately, while consumer loan
demand held steady in August, according to the latest survey of
senior loan officers in the Second District. Demand for commercial
and industrial loans was lower at almost 30 percent of the banks and
higher at just over 15 percent. Refinancing activity continued to
slow, decreasing at 40 percent of the banks. The proportion of loan
officers reporting increased willingness to lend declined since the
last report, but is still higher than during the spring. Nearly all
banks say their credit standards are unchanged.
Average loan rates were steady to slightly lower in all categories, after rising in the prior survey, while deposit rates were generally higher. Loan delinquency rates, which had risen moderately in July, held steady for consumer loans and declined for commercial loans in August.