November 2, 1983
Economic activity in the Second District continued to show improvement in recent weeks. In comparison to the mixed picture we reported in late summer, almost all Second District economic indicators now appear to be headed upward. Department store sales picked up sharply in late September when a long period of unusually hot weather ended. homebuilders have been quite busy and expect to remain so over the next few months. The brisk pace of office leasing activity was maintained in New Jersey and southern Connecticut and has begun to spread into midtown Manhattan as well. The New Jersey and Connecticut legislatures have authorized increased expenditures on upgrading roads and bridges, and New Yorkers will vote on an infrastructure bond referendum in November. The region's manufacturing activity expanded further, but employment gains are still slow. On the financial side, business loan demand is beginning to pick up.
Consumer Spending
The pace of retail spending in the Second District has shown some
improvement in recent weeks. Most respondents stated that the
unusually hot weather in the first half of September depressed
sales. However, after the temperature cooled, widespread sharp gains
were registered towards the end of the month. A New York State
chain, for example, noted overall September sales showed no
improvement over the year-ago level, but activity in the final week
of the month was seven percent above the corresponding 1982 figure.
Another large retailer with a lower-than-planned sales increase of
five percent in September had a 15 percent gain in early October,
albeit with the help of some special promotions. Only one merchant
reported weakening of sales in October, citing the fact that the
weather had not yet been cold enough to spur sales of warm clothing.
Inventories were reported at satisfactory levels with only one
retailer mentioning that they may be a little high. Sales at most
stores remained at or above planned levels, and the outlook for the
fourth quarter generally is optimistic.
Construction and Real Estate
Residential construction activity remained strong throughout the
District and builders have contracts which should keep them busy
into the spring. After that, however, the outlook is uncertain.
October is typically the time when prospective buyers begin looking
for homes to be completed the next summer. However, while weekend
traffic has picked up in New Jersey, demand thus far has been
sluggish in much of New York. Higher mortgage rates were cited as a
factor. In addition, some New York builders have postponed seeking
contracts for summer delivery because of uncertainty about rising
costs of materials and labor availability.
The brisk pace of nonresidential real estate activity was maintained in recent weeks. A high volume of leasing transactions continued in New Jersey, southern Connecticut and various New York City suburban areas. Our contacts also noted a definite upswing in midtown Manhattan as earlier negotiations for space are now culminating in actual commitments.
State governments in the District plan a substantial upgrading of roads, bridges and public transportation. The legislatures of New Jersey and Connecticut have already increased bonding authority for improving transportation infrastructure. New Yorkers will vote in early November on a referendum for a $1.25 billion debt issue, but even if that fails, the pace of infrastructure renovation will increase in New York.
Business Activity
Business activity continued to expand in the manufacturing sector,
but at a generally moderate pace. The upturn at automotive
manufacturers and suppliers has been maintained, but a producer of
truck engines reported some temporary difficulty obtaining parts.
Manufacturers of products such as electrical equipment and optical
supplies have already begun a modest hiring of new employees. Other
firms anticipate additional hiring when plant expansions which are
currently underway are completed. Several high technology firms
announced plans to expand and ground was recently broken on Long
Island for a high-tech industrial park. Many manufacturers continued
a cautious inventory policy, but for the first time in several
months some firms expressed a willingness to begin inventory
accumulation. A more positive attitude about the continuation of the
recovery was noted throughout most of the District.
Unemployment rates have recently fallen throughout the region, but remain above year-ago levels in some areas.
Financial Developments
Second District banks report a pickup in business lending in recent
weeks. Some banks have become more aggressive in seeking new
customers. In addition, demand has also been increasing as business
financing needs begin to rise and interest rates offered on loans
remain relatively flat Business lending appears to be comparatively
stronger outside the immediate New York City area.
Mortgage lending seems to be flat, but bank offering particularly competitive rates have been able to raise their market shares.
The deregulation of most consumer time deposits on October 1 resulted in many banks and thrifts institutions in New York City offering very attractive rates, particularly on six-month certificates where rates were offered as high as 11 percent.