November 4, 1992
Developments in the Second District since the last report remained basically mixed. Most contacts at District department stores reported stronger-than-planned sales in September and positive over- the-year changes. Moreover, office leasing activity showed some improvement as firms continue to avail themselves of lower rents and other concessions in order to upgrade their quarters. The residential construction market was mixed, however, with homebuilders in upstate New York reporting somewhat stronger buying interest than those in downstate communities. New York's unemployment rate rose in September while New Jersey's fell following August declines in both states. The latest Buffalo and Rochester purchasing managers' reports were less favorable than earlier. Most senior loan officers at small and midsized banks indicated no change in their willingness to lend.
Consumer Spending
Most contacts at District department stores reported stronger-than-
planned sales in September and positive over-the-year changes.
However, while generally pleased with the results, some retailers
cited the later back-to-school shopping this year and extra
promotional activity as major factors in September's strength. No
one thought a turnaround in consumer sentiment had occurred and most
said they were cautiously optimistic about what lies ahead.
Year-to-year sales increases in September generally ranged from 4 to 16 percent. One chain reported a smaller-than-expected over-the-year decrease. Categories registering the greatest improvement were sports apparel, outerwear and bed and bath items. Inventories are reportedly in good shape-either on plan or a little below.
Residential Construction and Real Estate
The residential construction market remained mixed in recent weeks
with homebuilders in upstate New York reporting somewhat stronger
buying interest than those in downstate communities. In some New
Jersey areas, plans are being revived and revised for projects that
have been in default, and in New York City, several moderate-income
housing developments have recently been started or soon will be
underway. Developers report continuing problems in obtaining
acquisition and construction loans, however, and observers note that
most new homebuilding involves substantial amounts of internal
financing or government subsidies.
Office leasing activity showed some improvement as firms continue to avail themselves of lower rents and other concessions in order to upgrade their quarters. In addition, most areas report little or no new office space under construction at this time. As a result of these developments, several areas, including Long Island, Fairfield and Westchester counties and mid-Manhattan, have experienced a recent decline in office vacancy rates, although they remain at high levels.
Other Business Activity
District unemployment rates moved in opposite directions during
September following August declines. New York's rate rose to 9.0
percent from 8.5 percent in August while New Jersey's rate, also at
9.0 percent in September, fell from 9.4 percent. Two developments
are likely to boost construction employment. The Port Authority of
New York and New Jersey recently announced that it will build an
additional international terminal at Newark Airport and that major
projects are planned or already begun at La Guardia and Kennedy
airports, including the first new passenger terminal at Kennedy
since the 1960s. In another major construction project, New York
City has embarked on a huge program to build or renovate 32 court
facilities throughout the five boroughs over the next several years.
In other news, a large discount chain has agreed to acquire and
reopen 6 of the 11 Alexander Department Stores in the New York
metropolitan area which closed earlier this year. Remington Products
announced that it will remain in Bridgeport, Connecticut, thereby
retaining 1100 jobs and probably repatriating some jobs from abroad
as well. On the negative side, I.B.M. will reduce production of
semiconductors and mainframe computers, probably resulting in
layoffs at its factories in the District.
The September survey of Buffalo purchasing managers showed much smaller percentages of firms reporting a rise in new orders and production following substantial improvements in these categories during August. The latest survey of Rochester purchasing managers also showed a sizable drop in the percentage anticipating an improvement in business conditions over the next three months.
Financial Developments
Most senior loan officers surveyed at small and midsized banks in
the Second District indicated that their willingness to lend
remained steady relative to two months ago, although the percentage
of officers citing an increased willingness was somewhat higher than
in the last survey. Almost all bankers reported that they would not
ease their standards in response to the recently revised federal
guidelines recommending less rigid loan-to-value ratios for
construction and land development loans.
A majority of respondents noted that overall loan demand remained sluggish. Largely due to refinancing activity, demand for residential mortgages continued to increase and consumer loan demand improved slightly. However, demand for commercial and industrial loans and nonresidential mortgages weakened. Almost all respondents reported either maintaining or lowering interest rates. A majority of officers indicated that delinquency rates for residential mortgages and commercial and industrial loans were unchanged to slightly lower during the preceding two months.