Research

Fed Reserve Issues Beige Book Report For NY

No Surprise That Economic Outlook Is Glum

Keith Griffin

April 15, 2020

Federal Reserve Bank of New York

The Federal Reserve Bank for New York has not surprisingly issued a glum economic report for what is essentially the top spot for the coronavirus in the United States. The data was released as part of the Fed’s monthly Beige Book that tracks economic activity in each bank district.

Activity fell sharply in nearly every sector, except wholesale trade, where activity was essentially flat. Business contacts in manufacturing and most service industries also expressed fairly widespread pessimism about the outlook. In general, there is great uncertainty and concern about the duration of the coronavirus pandemic and its economic effects.

Banking and Finance

Financial service businesses have noted widespread declines in activity and revenues. Though only moderately pessimistic about the near-term outlook, finance sector contacts expressed widespread concern about maintaining adequate cash flow and collecting payables from customers.

A majority of small- to medium-sized banks across the District reported lower loan demand across all categories. Bankers also reported tighter credit standards and narrowing loan spreads across the board. Higher delinquency rates were reported across all categories—particularly commercial & industrial loans. Bankers were also asked, in light of the coronavirus pandemic, if they had adopted more lenient policies on loan repayments. The vast majority said they had done so on residential mortgages, compared with about half on commercial & industrial loans, and a somewhat over half on commercial mortgages.

Real Estate and Construction

Home sales and rental markets across the District have largely paused, and many residential rental and sales listings have been removed, reflecting stay-at-home directives. Real estate agents were reclassified as essential in early April, though traffic has been weak and largely limited to virtual showings.

A major appraiser noted that selling prices of New York City co-ops and condos were continuing to decline through mid-March, especially at the high end. Given the lack of activity since, though, it is difficult to gauge more recent changes in prices and rents. Landlords are reportedly concerned about how many tenants are going to be delinquent on their April rent—particularly in New York City, where a majority of residents are renters.

Commercial real estate markets across the District have also ground to a halt, with office, industrial, and retail leasing activity largely ceasing. Office availability rates and rents have not changed noticeably thus far, but real estate contacts have noted concern about collecting rent from commercial tenants.

New construction starts have essentially fallen to zero, and ongoing construction projects have paused, except where considered essential.

Click the link for more information about New York District economic conditions.

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