Beige Book Report: New York
July 12, 2017
Summary of Economic Activity
Economic activity in the Second District has expanded at a modest pace since the last report, while labor markets have tightened further. Input price pressures have eased slightly, while selling prices have continued to rise modestly. Manufacturers noted a pickup in business activity, while the various service industries indicated mixed results. Consumer spending has picked up a bit since the last report, and consumer confidence has remained close to a cyclical high. Housing markets have strengthened, while commercial real estate markets were mixed but slightly softer. New residential construction activity has been steady at a subdued level, while commercial construction has picked up modestly. Banks reported that loan demand was steady to softer, while delinquency rates continued to decline.
Employment and Wages
The labor market has continued to tighten since the last report. Contacts at employment agencies noted that hiring has picked up and that jobs have become harder to fill. A major New York City employment agency noted a pickup in hiring, especially from financial firms. In upstate New York, there has been a pickup in demand for both full-time and temporary workers--particularly for administrative and customer-care workers. Contacts also noted an ongoing shortage of software developers and skilled workers more generally.
Manufacturers have continued to add jobs but at a somewhat slower pace than in the last report. Businesses in the finance, wholesale trade, real estate and construction sectors report that they are hiring, on net, while those in the restaurant & hotel industry indicated some cutbacks in staffing levels. Businesses in manufacturing and most service industries expected to add jobs, on net, in the months ahead.
Overall, wages are reported to have risen moderately, though contacts in the transportation, warehousing, wholesale trade, and leisure & hospitality industries report more widespread increases in wages.
Prices
Businesses generally reported upward pressure on input prices but to a lesser degree than in the last report, while selling prices continued to rise modestly. Those in the wholesale and transportation industries reported modest increases in selling prices, on balance, while businesses in other sectors indicated little change.
General merchandise retailers reported that prices have been steady, while New York City hotels indicated that room rates have slipped modestly. In contrast, Broadway theaters noted rising ticket prices, with the average price up 10-15 percent from a year earlier.
Consumer Spending
Retailers reported that sales have weakened, on balance, while they expect business to be generally steady for the second half of the year. Retailers in upstate New York reported that both shopper traffic and sales have been flat at weak levels. A major retail chain noted that sales were roughly on plan, though they weakened a bit from May to June. Retail business in New York City, which had been particularly soft, improved slightly. Inventories were generally at or below normal levels, while prices were steady to up modestly.
Auto dealers in upstate New York reported that sales of new vehicles picked up in May and early June and were up from a year ago. Vehicle inventory levels have crept up, but dealers are generally optimistic about the outlook. One contact noted that used vehicle sales have picked up, while another reports that they are steady. Retail and wholesale credit conditions were characterized as favorable, but credit remains tight on sub-prime auto loans.
Consumer confidence in the Middle Atlantic states (NY, NJ, PA) edged down in June but remained near its cyclical high set in March.
Manufacturing and Distribution
Manufacturers reported that business activity has picked up substantially since the last report. Businesses in the wholesale trade and transportation industries, however, continued to report subdued growth. Similarly, while manufacturers remain broadly optimistic about the outlook for the second half of this year, those in transportation and wholesale trade remain only mildly upbeat.
Services
Businesses in most service industries reported steady to moderately growing business activity. Contacts in professional and business services noted a pickup in activity and expressed widespread optimism about the near-term outlook. Contacts in education & health services noted a slowdown in growth, while information industry contacts reported little change in activity.
The leisure & hospitality sector has been mixed. A number of contacts have reported a pullback in activity, coupled with increased pessimism about the outlook. While tourism activity in New York City has remained fairly buoyant, advanced travel bookings are reported to be down, especially from abroad. In general, visitors are reported to be spending less--partly reflecting a shift toward more domestic and fewer international visitors. On a more positive note, Broadway theater attendance and revenues were reported to be fairly strong in May and June. Tourism was described as strong in the Finger Lakes region of upstate New York.
Real Estate and Construction
Housing markets across the District have strengthened somewhat. Sales volume has picked up throughout the New York City area--particularly for moderately-priced, single-family homes in outlying areas. In contrast, sales activity has slowed a bit in parts of upstate New York, restrained by a lack of homes on the market.
A real estate contact in upstate New York State reported continued escalation in home prices, with homes in more sought-after areas often selling for above the list price. Selling prices of both single-family homes and apartments have also picked up in and around New York City, though prices of Manhattan condos and co-ops have risen only marginally. New York City's rental market has remained mostly steady. Rents remain flat overall--rising on smaller, less expensive units but declining on larger and pricier apartments. Landlord concessions have stopped rising but are more prevalent than usual.
Commercial real estate markets have been mixed but slightly softer on balance. The market for office space has been steady to slightly weaker: availability rates edged up, while asking rents slipped in New York City but were little changed elsewhere. However, the industrial market has strengthened further, with availability rates declining and asking rents up roughly 10 percent over the past year. In contrast, the market for retail space has continued to slacken, with vacancy rates rising to multi-year highs and asking rents little changed.
Both single-family and multi-family new home construction has been steady at a fairly subdued level, though there is still a good deal of multi-family development under construction. Commercial construction, on the other hand, has picked up. New office construction has expanded noticeably in northern New Jersey and New York City's outer boroughs but has been fairly restrained in other parts of the District. Industrial construction has picked up in northern New Jersey but has remained flat and fairly subdued elsewhere.
Banking and Finance
Small to medium sized banks reported weaker demand for consumer loans, but no change in demand for residential mortgages, commercial mortgages, or commercial & industrial loans. Refinancing activity decreased for all types of loans. Bankers reported slightly easier credit standards for residential mortgages, and unchanged standards in other loan categories. Bankers indicated narrowing spreads of loan rates over cost of funds for all types of loans. Respondents also noted an increase in the average deposit rate. Banks reported lower delinquency rates across all loan categories--particularly on consumer and residential mortgage loans.
For more information about District economic conditions visit: www.newyorkfed.org/data-and-statistics/regional-data-center/index.html