Beige Book Report: New York
November 29, 2017
Summary of Economic Activity
Economic activity in the Second District continued to grow at a moderate pace in the latest reporting period, and the labor market has been steady and tight. Input prices continued to increase moderately, and selling prices continued to rise modestly. Manufacturers reported that growth slowed to a moderate pace, while businesses engaged in wholesale trade, leisure & hospitality, and professional & business services reported brisk growth. However, contacts in health & education services and transportation noted slight softening in activity. Consumer spending was generally steady since the last report, as was consumer confidence. Housing markets have been mixed, with particular weakness at the high end of both the sales and rental markets. Commercial real estate markets were steady, on balance. New residential development and office construction have slowed, but new industrial development has picked up. Finally, banks reported a pullback in demand for home mortgage loans and ongoing declines in delinquency rates across all loan categories.
Employment and Wages
The labor market has been steady and tight. Employment agencies generally report that labor market conditions have been little changed. Still, one major New York City agency notes that hiring activity has been busy for this time of year. Businesses have reported ongoing difficulty finding qualified workers, particularly in manufacturing.
Business contacts across most industries indicated that they continue to increase staffing levels modestly. Similarly, hiring plans for the months ahead have remained moderately positive, on net, with particularly strong hiring expected in the finance sector. A contact in upstate New York noted that some retailers plan less seasonal hiring this year.
Overall, contacts indicated that wages have continued to rise modestly. Further, businesses in a broad range of industries said they plan to raise wages in the months ahead--most notably in the leisure & hospitality, education & health, transportation, and trade sectors.
Prices
Input prices have continued to rise moderately in most industry sectors, with the exception of retail, where contacts reported more significant cost increases.
Selling prices overall continued to rise modestly, though contacts in the leisure & hospitality industries noted stronger price increases. But within that sector, for example, price increases have varied: while hotel room rates have been essentially flat, Broadway theater ticket prices have accelerated and were up more than 15 percent from a year earlier. In general, retail prices have been stable, though some general merchandise stores noted increased discounting. Looking ahead, the only sectors in which businesses planned any noticeable price hikes were in wholesale trade and transportation.
Consumer Spending
Retail contacts reported that sales have been steady in recent weeks. Retailers in upstate New York indicated that both traffic and sales activity remained steady. Contacts in the New York City area gave a mixed assessment, but overall sales were little changed. Retail businesses were mildly optimistic about the near-term outlook, and inventories were said to be in good shape.
Auto sales have been mixed but, on balance, steady since the last report. Dealers in upstate New York reported that demand for new vehicles remained fairly robust in October but not quite on par with September's brisk levels. However, scattered increases were reported in used vehicle sales. Vehicle inventories were said to be a bit on the high side but mostly at satisfactory levels. Retail and wholesale credit conditions have remained favorable, according to dealers.
Consumer confidence in the Middle Atlantic states (NY, NJ, PA), held steady at a high level in October.
Manufacturing and Distribution
Manufacturers reported continued growth in business activity in recent weeks, though to a lesser degree than in recent months. Contacts in the wholesale trade sector noted a further acceleration in business, whereas transportation firms reported some pullback in activity. Looking ahead, manufacturers continued to express widespread optimism about the near-term outlook, while wholesale distributors and transportation firms were moderately optimistic.
Services
Service-sector firms noted some pickup in growth. Contacts in leisure & hospitality and professional & business services reported fairly widespread increases in activity, while information industry firms indicated modest improvement. Education & health service providers indicated that activity was flat to slightly lower, on balance. Service sector businesses were generally optimistic about the near-term outlook--particularly those in business & professional services.
New York City hotels reported brisk business, though an expanding supply of hotel rooms, largely in a moderate price range, has held room rates down. Broadway theaters reported that attendance was flat to somewhat lower in October and early November and down from a year earlier. An authority on New York City's tourism industry noted that domestic tourism has been increasingly robust, while tourism from overseas has receded, though by less than had been expected.
Real Estate and Construction
Housing markets across the District have been mixed but, on balance, stable. Real estate contacts in upstate New York report that sales volume has receded somewhat but remains quite strong, while prices have continued to climb, driven by sturdy demand and low inventories. Housing markets across New York State have exhibited a similar pattern, with prices statewide running about 6 percent ahead of a year ago. Northern New Jersey's market, in contrast, has seen sales volume growing but prices generally flat. Similarly, sales of New York City co-ops and condos have picked up, while prices have been mixed but overall flat--rising modestly at the low to middle range of the market but declining at the high end. One contact noted that some newly-developed high-end properties have recently sold for roughly 25 percent below the initial asking price.
Rental markets have been steady to softer. Rents across New York City have edged down overall, again led by the high end of the market, where landlord concessions have remained steady at high levels. Manhattan's rental vacancy rate, though still quite low, has reportedly risen for three straight months.
Commercial real estate markets have been mixed. Office availability rates have climbed modestly in New York City and Long Island but have remained essentially flat across the rest of New York State, southwestern Connecticut and northern New Jersey. Asking rents have risen in Manhattan and upstate New York but remained flat elsewhere. The market for industrial space has remained fairly strong. In upstate New York, industrial rents have continued to rise at a nearly 10 percent pace, while vacancy rates have declined to multi-year lows. Industrial rents have risen at a more than 5 percent rate in downstate New York and northern New Jersey, while vacancy rates in those areas remain steady near multi-year lows. Retail vacancy rates have continued to rise across New York City.
New multi-family construction has wound down throughout the District, though a good deal of residential space remains under construction. New commercial development has slowed as well. New office development has picked up in Long Island but has largely ground to a halt elsewhere. New industrial development, on the other hand, has picked up in New York City's outer boroughs and in upstate New York and remains at a fairly brisk level in northern New Jersey.
Banking and Finance
Small to medium-sized banks in the District reported lower demand for residential mortgages, higher demand for commercial mortgages and C&I loans, and steady demand for consumer loans. Bankers also reported that refinancing activity decreased, on balance, for all types of loans. Credit standards were reported to be unchanged across all loan categories. Bankers noted lower loan spreads for C&I loans, and unchanged spreads across all other loan categories. Finally, banks reported lower delinquency rates in all loan categories.
For more information about District economic conditions visit: www.newyorkfed.org/data-and-statistics/regional-data-center/index.html