The Second District's economy has shown further signs of softening in recent weeks. Manufacturers report that business activity has been steady to slower since the last report, and that increases in both input costs and selling prices remain widespread. Contacts at non-manufacturing firms generally report further weakening in business conditions. The labor market has slackened since the last report. Consumer confidence slipped to new lows in June. Housing markets have shown further signs of deteriorating, with sales activity down and prices flat to lower; Manhattan's rental market has also shown signs of softening. Office markets in and around New York City were mostly softer in the second quarter. Finally, bankers report weakening demand for loans (especially consumer loans), further tightening in credit standards, and increasing delinquency rates in the household sector. View full report.

Construction and Real Estate

A contact in New Jersey's housing industry indicates that the market continued to deteriorate in recent months but not dramatically. Prices have declined by an estimated 15 percent from peak levels in 2005-06, with most of the decline coming in the past year. Sales activity is still described as weak; while buyer traffic is said to be holding up at the lower end of the market (under $300K), it is described as very weak at high end. Builders note that it has grown increasingly hard for prospective homebuyers to qualify for a mortgage. Single-family construction has reportedly dropped off sharply over the past year, but multi-family re-development in urban areas has remained fairly stable. 

An industry contact notes that new hotel development has virtually ground to a halt but that the pipeline of existing development is larger than ever (close to 15,000 rooms), though a number of these projects are having trouble getting adequate financing.

Financial Developments

Respondents indicate a tightening of credit standards across all loan categories: the proportion of bankers reporting higher standards ranged from 26 percent in the commercial and industrial category to 35 percent on consumer loans.