Beige Book Report: New York
October 18, 2017
Summary of Economic Activity
Economic activity in the Second District continued to expand at a moderate pace in the latest reporting period, and labor markets have remained steady and tight. Input prices continued to increase moderately, while selling prices were up only modestly. Manufacturers reported continued brisk growth in activity, and businesses engaged in wholesale trade and information noted a pickup in activity since the last report. However, contacts in professional & business services and health & education services generally characterized business activity as flat. Consumer spending was generally steady since the last report, while consumer confidence edged up. Housing markets have been mixed but, on balance, a bit stronger, though the high end of the market has been soft. Commercial real estate markets were mostly steady. New residential construction activity has slowed further, while commercial construction has been steady to weaker. Finally, banks reported a pickup in demand for home mortgage loans and lower delinquency rates across all loan categories.
Employment and Wages
The labor market has remained tight. One major employment agency in New York City and another in upstate New York both described the job market as tight but steady, with only modest upward pressure on wages in most industries. Businesses continued to report difficulty finding qualified workers.
Business contacts in manufacturing and in most service-sector industries reported that they have added jobs on net, though to a modest degree. Similarly, hiring plans for the months ahead are subdued but positive, on net.
Overall, wages have continued to rise at a modest pace, though contacts in education & health, leisure & hospitality, and real estate report somewhat more widespread wage hikes.
Businesses generally indicated that input prices continued to rise moderately, though contacts in retail, real estate, and education & health noted more widespread increases.
Selling prices overall continued to rise modestly, though contacts in the retail and leisure & hospitality industries noted increasingly widespread price increases in the latest reporting period. One noteworthy example has been ticket prices at Broadway theaters, which have been running about 12 percent ahead of comparable 2016 levels. On the other hand, prices of used vehicles have softened, and some general merchandise retailers have recently become more aggressive with price discounting and promotional activity. Education & health firms reported moderate increases in prices received, while contacts in other industries generally reported that selling prices were steady.
Retail contacts reported that sales have been mixed but, on balance, flat in recent weeks. Retailers in upstate New York indicated that both traffic and sales activity have been steady and little changed from a year earlier. A general merchandise chain indicates that sales in the District have picked up and were ahead of plan but still down slightly from a year earlier. Retail inventories were generally reported to be steady and at satisfactory levels.
Auto sales, on the other hand, have remained solid. Dealers in upstate New York reported that demand for new vehicles was fairly robust in September and that sales were up from a year earlier, led by strong leasing activity. New auto sales across upstate have been near record highs. Used vehicle sales have been steady to modestly stronger. Vehicle inventories were said to be at satisfactory levels. Retail and wholesale credit conditions have remained favorable, according to dealers.
Consumer confidence in the Middle Atlantic states (NY, NJ, PA), which was already at a fairly high level, edged up further in September.
Manufacturing and Distribution
Manufacturers reported continued brisk growth in business activity in recent weeks. Contacts in the wholesale trade sector noted a pickup in growth, while those in the transportation industry continued to report modest growth. Looking ahead, manufacturers and wholesalers remained broadly optimistic about the near-term outlook, while transportation firms have grown considerably less optimistic.
Service-sector firms generally reported sluggish growth. Contacts in both professional & business services and education & health services noted that activity was flat, on balance, while firms in the information and leisure & hospitality industries noted a pickup in growth. Service sector businesses remained mildly optimistic about the near-term outlook, except in the professional & business services industry, where contacts were considerably less upbeat than in recent months.
Broadway theaters reported that attendance and revenues were fairly strong through the first half of September but have tapered off in recent weeks, with attendance falling below comparable 2016 levels.
Real Estate and Construction
Housing markets across the District have been mixed but, on balance, moderately stronger. Real estate contacts in upstate New York report that sales volume has been hampered by a lack of inventory, while prices have continued to climb, with homes often selling for above the asking price. In the suburbs around New York City, home sales volume has been strong and prices have accelerated somewhat, though the high end of the market continues to lag, reflecting excess supply. New York City's condo and co-op market has strengthened modestly; home prices have continued to rise moderately in Brooklyn and Queens but have risen only slightly in Manhattan. Across the city, the high end has continued to lag; sellers have become more negotiable and this has boosted activity somewhat.
Rental markets have also been mixed. Rents in and around New York City have been rising moderately for smaller apartments but declining for larger and pricier units. Landlord concessions have leveled off but remain fairly widespread.
Commercial real estate markets have mostly remained steady. The market for office space has softened further in upstate New York, Long Island and Brooklyn but has been steady to slightly stronger in Manhattan and northern New Jersey. Vacancy rates for industrial space, which had been declining steadily in recent years, have leveled off in and around New York City, though they have continued to decline in upstate New York. Industrial rents have continued to rise at a brisk pace throughout the District.
Single-family home construction has been sluggish--particularly for low and mid-priced homes--and appears to have tapered off somewhat since the last report. New multi-family construction starts have picked up further in northern New Jersey but have remained lackluster across the rest of the District. Still, there continues to be a good amount of ongoing multi-family construction in progress throughout the District. Similarly, new commercial development--of both office and industrial space--has strengthened further in northern New Jersey but has been increasingly sluggish across the rest of the District.
Banking and Finance
Small to medium-sized banks in the District reported higher demand for residential mortgages but no change in demand for consumer loans, commercial mortgages, or commercial & industrial loans. Bankers also reported that refinancing activity decreased, on net. Contacts reported tighter credit standards for commercial mortgages, and unchanged credit standards across all other loan categories. Banks reported higher loan spreads overall, largely reflecting higher spreads on commercial mortgages. Respondents also reported an increase in the average deposit rate. Bankers reported lower delinquency rates across all loan categories.
For more information about District economic conditions visit: www.newyorkfed.org/data-and-statistics/regional-data-center/index.html