Jaison Abel and Jason Bram
The New York Fed’s latest Beige Book report points to continued moderate growth in the regional economy and some reduction in cost pressures. Eight times a year, each of the nation’s twelve Federal Reserve Banks produces a report on current economic conditions in its District, based on largely anecdotal information obtained from a variety of regional business contacts. The New York Fed’s report covers New York State, northern New Jersey, and southwestern Connecticut. The twelve District reports are combined with a national summary to produce what has come to be known as the Beige Book—a report that provides some of the most timely information available on economic conditions.
In the latest report—based on information collected through May 25—a number of sectors provide positive signals. Some of the most encouraging news has come from regional banks: contacts there report increases in loan demand that are more widespread than at any time since the mid-1990s, with much of the heightened demand generated by commercial borrowers. Moreover, bankers also cite widespread declines in delinquency rates across all categories—and this is on top of similar declines noted in the last Beige Book report, released in mid-April. Other signs of continued strength are coming from the travel and tourism sectors: New York City hotels report ongoing strong growth in revenue, and Broadway theaters saw increases in both total revenues and attendance. Even manufacturing contacts report improving business conditions and say they plan to hire, on net, in the months ahead. And finally, while housing markets have generally been slow to recuperate from the aftermath of the housing bust, activity has picked up recently in Western New York, and rental markets in and around New York City have continued to firm.
But not all the news is positive. There are ongoing layoffs in the financial sector, and a major employment agency reports that large financial firms remain reluctant to hire, and that hiring activity more generally is mixed. Reduced demand from the finance sector is also dampening office leasing activity a bit, though demand for space from firms in other sectors—especially the technology industry—is helping to keep vacancy rates low. Retail sales have not been particularly strong lately, but neither have they been especially weak. More broadly, however, business contacts generally see business improving, albeit gradually, and remain fairly upbeat about the economic outlook.
As for price trends, business contacts in manufacturing and other sectors note that the pace of input price increases has slowed from earlier this year, and most say that their selling prices are steady to somewhat higher. Retailers mostly report that prices are stable, and prices for fall clothing are expected to be down a bit because of the recent pullback in cotton prices. However, one area where prices do appear to be rising is tourism-related business—specifically, hotels and Broadway theaters.
Consistent with the Beige Book reports released earlier this year, the latest release suggests that the region is continuing its economic recovery. However, how the regional economy will be affected by the ongoing European debt crisis, as well as by the very recent turbulence in the financial markets and drop in energy prices, remains to be seen. The next Beige Book, to be released on July 18, may shed light on the impact of these developments.
Disclaimer
The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.
RSS Feed
Follow Liberty Street Economics
