Beige Book Report: New York
April 18, 2018
Summary of Economic Activity
Economic activity in the Second District continued to grow at a modest pace since the last report, and the labor market has remained tight. Input price pressures have remained widespread but do not appear to have intensified further, while selling prices have accelerated somewhat. Growth has picked up in the manufacturing sector but slowed in most distribution and service industries. Consumer spending was mixed but still generally sluggish in March--partially attributable to unseasonably cold and wet weather--though tourism has shown signs of picking up. Housing markets have been mixed, while commercial real estate markets have been steady to slightly softer. Construction activity has been steady to somewhat slower. Finally, banks reported a pickup in loan demand and no change in delinquency rates.
Employment and Wages
The labor market has remained tight, and hiring activity has been steady. One employment agency in upstate New York noted a seasonal pickup in hiring. A major New York City agency indicated that hiring has been robust and that it is taking longer to fill jobs, particularly those requiring technical skills. Businesses noted particular shortages of tech workers, truck drivers, and skilled tradespeople. A few contacts cited difficulties in attracting young job-seekers away from major urban centers.
Business contacts in the finance and information sectors reported fairly brisk hiring activity, while those in manufacturing, wholesale trade, education & health, and leisure & hospitality indicated modest hiring, on net. Retailers continued to report declining employment. Still, firms in most service industries, including retail, said they plan to expand hiring in the months ahead, while manufacturers have scaled back hiring plans.
Businesses across all major service industries reported ongoing wage pressures. Some contacts maintained that wages had accelerated over the past year, though plans to raise wages in the months ahead were little changed. A New York City agency reports that a new law prohibiting potential employers from asking about a candidate's salary history has led candidates to demand higher pay.
Prices
Input prices have continued to rise briskly but have not accelerated further, according to contacts in most industry sectors. Still, businesses generally anticipated further increases in the months ahead. A growing proportion of service-sector contacts indicated that they were raising their selling prices--most notably, wholesalers--but manufacturers noted only modest hikes in their prices.
Among retailers, some contacts indicated that they have held prices steady, while others reported price increases. Prices for New York City hotel rooms and Broadway theater tickets picked up noticeably in March. Looking ahead, a growing proportion of businesses in manufacturing and wholesale trade said that they planned to raise their prices, while most retailers did not foresee any significant price hikes.
Consumer Spending
Retail contacts reported that sales have picked up somewhat in recent weeks but are still considered lackluster, reflecting unseasonably cold and wet weather. Retailers in upstate New York indicated that sales have strengthened but remained fairly subdued, despite strong customer traffic. A major retail chain noted that sales advanced in March, running somewhat ahead of plan and up modestly from a year ago. Inventories were generally reported to be at satisfactory levels, and retailers were moderately optimistic about the near-term outlook.
New vehicle sales in upstate New York were reported to have weakened in February but there were some signs of a rebound in March. Sales of used cars were steady to up slightly. Vehicle inventories were said to be in fairly good shape. Dealers continued to characterize retail and wholesale credit conditions as favorable.
Consumer confidence in the Middle Atlantic states (NY, NJ, PA) edged up to a new multi-year high in March.
Manufacturing and Distribution
Manufacturers reported some acceleration in growth since the last report. In contrast, wholesalers indicated a pause in growth, and transportation firms reported some decline in activity. Looking ahead, manufacturers have become substantially less optimistic about the near-term outlook, while contacts in wholesale distribution and transportation have remained moderately optimistic.
Services
Reports from service-sector firms were mixed but generally pointed to little growth in activity. Contacts in professional & business services and leisure & hospitality reported modest growth, while those in the information and health & education sectors reported flat activity. Service sector businesses have grown less optimistic about the near-term outlook, most notably in the health & education sector.
Tourism in New York City has picked up since the last report. Hotels reported an increase in both revenues and occupancy rates in March. Broadway theaters indicated that business was sluggish in February and early March but picked up noticeably in the second half of the month.
Real Estate and Construction
Housing markets across the District have been mixed but, on balance, weaker in the latest reporting period. Real estate contacts in upstate New York reported that buyer traffic and sales activity have picked up in recent weeks, but that lean inventories have held back sales activity--especially at the lower end of the market. In New York City, sales of condos and co-ops have receded noticeably, while prices have edged down. One industry contact attributes this to uncertainty about the effects of the new federal tax law. However, housing markets in the areas around New York City have seen strong demand--while sales volume has been constrained by low and declining inventories, prices have picked up noticeably, except at the high end of the market.
Apartment rental markets have been mixed. Across New York City, vacancy rates have been steady, as landlord concessions have been increasingly prevalent, and effective rents have slipped across the board. In northern New Jersey and upstate New York, rents have continued to rise moderately, and concessions have remained fairly infrequent.
Commercial real estate markets have been steady to slightly softer. Office markets have been steady across the District--while leasing activity has slowed somewhat, vacancy rates and asking rents have been generally flat. The retail market has shown further signs of slackening, particularly in New York City, where vacancy rates have risen. However, northern New Jersey's retail vacancy rate edged down. In upstate New York, retail vacancies have been fairly stable. The industrial market has lost a bit of momentum but remains fairly strong. Asking rents have continued to rise at a fairly brisk pace throughout the District. Industrial vacancy rates have edged up across downstate New York but have continued to edge down in northern New Jersey and upstate New York.
Multi-family construction activity has leveled off in northern New Jersey and across upstate New York, but has slowed further in New York City. Office construction has picked up somewhat in New York City and upstate New York but has remained subdued elsewhere. Industrial construction has been steady at a fairly sturdy level.
Banking and Finance
Small to medium size banks in the District reported higher demand for residential mortgages, commercial mortgages, and C&I loans, and steady demand for consumer loans. Banks reported lower loan spreads for consumer loans and residential mortgages, and no change in spreads across all other loan categories. Bankers reported that both credit standards and delinquency rates were unchanged across all loan categories.
For more information about District economic conditions visit: www.newyorkfed.org/data-and-statistics/regional-data-center/index.html