Beige Book Report: New York
December 4, 1991
Reports on District developments remained mixed. October sales results at department stores were fairly evenly divided between those with sales above and below year-ago levels. District unemployment rates rose in October reversing September declines. The October purchasing managers' surveys indicated that business conditions stabilized in Rochester while deteriorating somewhat in Buffalo. Although residential construction continues sluggish, there has been some increased demand for existing homes and office space in several areas. Senior loan officers at small and midsized banks said their willingness to lend was unchanged from three months earlier.
Consumer Sector
October sales results at District department stores were divided
fairly evenly between those with higher and lower sales compared to
a year earlier. Over-the-year changes ranged from -2.5 percent to
+4.6 percent and for the most part fell short of plans. Responses
varied concerning best selling items with some citing women's and
men's apparel and others noting a pickup in hone furnishings.
Contacts stated that they have not had any extra promotional
activity compared with last year but that this could change if
competitive pressures increase during the holiday season.
Inventories are reported to be in good shape and intentionally below year-earlier levels in some cases. District retailers do not anticipate large year-to-year gains for the rest of the fourth quarter in light of the sluggish economy and surveys showing continued reluctance to spend on the part of consumers.
Residential Construction and Real Estate
While residential construction remains sluggish in the District,
some increase in demand for existing homes has been noted. In the
New York metropolitan area, for example, homeownership is reportedly
the most affordable it has been in years as a result of reductions
in existing home prices and lower mortgage rates. First-time
homebuyers in particular are said to be taking advantage of the
improved situation. In the Buffalo area, the volume of resales
increased 9.5 percent in October from a year earlier despite a
recent rise in the median price of such houses. More generally, a
recent study found that resales in both New York and New Jersey have
been increasing this year after declining steadily from 1998-1990.
Office leasing activity improved in parts of the District but vacancy rates moved in varying directions. Vacancy rates moved up in midtown Manhattan and Westchester County, largely as a result of corporate relocations and restructuring, while northern New Jersey's rate increased due to the completion of several new office buildings. By contrast, Fairfield County, Connecticut recently experienced a decline of almost a percentage point in its vacancy rate as a result of strong leasing activity and rates in downtown Manhattan and on Long Island showed virtually no change. Overall, office vacancy rates remain at high levels in much of the District.
Other Business Activity
District unemployment rates rose in October after declining in
September. New York's rate increased to 7.2 percent from 6.8 percent
in September while New Jersey's rate rose to 6.8 percent from 6.2
percent. The District's employment outlook is dimmed by several
recent developments. New York and Connecticut are now confronting
sizable current fiscal year budget gaps only months after struggling
to bring those budgets into balance. New York City is attempting to
close a large budget gap as well. These shortfalls could mean the
elimination of many additional government jobs. In preparation for
their planned merger, Chemical Bank and Manufacturers Hanover have
reportedly eliminated close to 1000 positions since last summer and
are expected to eliminate several thousand more over time. In
addition, a recently announced restructuring at Warner-Lambert will
result in the loss of 340 jobs at its New Jersey headquarters. In
upstate New York Crucible Materials plans to close a major part of
its steel plant, eliminating 250 jobs in early 1992 and Niagara
Mohawk Power will cut 400 jobs from its nuclear operations. On a
positive note, a consortium of Lufthansa, JAL and Air France has
proposed the first new terminal in 30 years to be built at Kennedy
International Airport.
The Rochester and Buffalo surveys of purchasing managers showed differing results in October. General business conditions stabilized in Rochester where surveyed firms reported business conditions similar to those in September. The 32 percent of firms reporting an improvement was double the number reporting a worsening. In Buffalo, however, some deterioration occurred as the percentages with lower production and fewer new orders more than doubled. Nonetheless, by far the majority of firms in both areas reported stable to improved conditions.
Financial Developments
Most senior loan officers surveyed at small and midsized banks in
the Second District reported that their willingness to lend remains
unchanged from three months ago. However, while they are "actively
and aggressively seeking high quality loans", demand remains weak.
Those respondents noting an actual decrease in overall loan demand
are using advertising campaigns as part of a marketing approach for
new loans.
Nearly all loan officers are now charging lower loan rates than they were three months ago, reflecting decreases in the prime rate. With the decline in interest rates has come an increase in mortgage refinancing. Credit standards at all banks surveyed have not changed over the past three months. Although delinquency rates in general have increased over recent months, delinquencies on commercial and industrial loans and on nonresidential mortgages have remained stable. Slightly less than half of surveyed officers reported a rise in consumer loan delinquencies.