The Federal Reserve issued its "Beige Book" of economic forecasts for various regions of the country yesterday and it found that the economy in the Second District encompassing the New York metropolitan region "has continued to contract since the last report, though at a more subdued pace."

"Contacts in a number of industry sectors," it said, "now report less widespread declines in business activity and express considerably more optimism about the near-term outlook, but continue to report ongoing weakening in employment. Retailers indicate that sales were weak but on or close to plan in both February and March, while inventories are generally said to be at satisfactory levels. Consumer confidence, though, remained at or near record lows in March, and tourism activity in New York City has been increasingly sluggish: both hotels and Broadway theaters report fairly steep drops in revenue over the past year."

"Bankers," according to the study, "report widespread increases in demand for home mortgages, including refinancing, but steady to somewhat weaker demand in other loan categories; they also report further tightening in credit standards and continued, though not dramatic, increases in delinquency rates across all segments. Retail sales were reported to be down from a year earlier in February and March but generally on or close to plan. One large retail chain reports that same-store sales fell more than 10 percent from a year earlier, but another major chain, as well as two large shopping malls in upstate New York, report more modest declines. To some extent, March sales comparisons (and plans) are adversely affected by the later Easter this year."

Consumer surveys show confidence indexes to be at or near record lows. The Conference Board reports that consumer confidence among residents of the Middle Atlantic states (NY, NJ, Pa) slipped 2 points to another record low in March.

Tourism activity in New York City weakened a bit further since the last report. Manhattan hotels report steep year-over-year declines in revenue - down 33 percent in February and 35 percent in March - reflecting 20 to 25 percent drops in room rates, coupled with noticeably lower occupancy rates, the study found, adding that "Broadway theaters are also seeing continued weakening in business: they report that attendance picked up a bit more than the seasonal norm from February to March, but it was still down 16 percent from a year earlier."

New York City's office market continued to deteriorate, with vacancy rates climbing to a 4-year high in March and asking rents on Class A space falling 14 percent from a year earlier. "A major commercial broker cites a huge increase in available sub-lease space, mostly from financial service firms. In contrast, office markets in outlying areas were steady to slightly stronger in the first quarter: vacancy rates and asking rents were little changed in northern New Jersey, Westchester and southwestern Connecticut; in Long Island, vacancy rates improved to a 3-year low, while rents edged higher. Similarly, office markets in upstate New York showed resilience: office vacancy rates declined in the Buffalo and Syracuse areas and were little changed in metropolitan Rochester and Albany; rents were little changed across the board. The purchase market, however, is still reported to be exceptionally sluggish throughout most of the District."

"Manhattan's retail market softened more than others: while vacancy rates were steady at low levels, asking rents declined sharply for the second straight quarter, and a relatively large volume of new retail space is due to be completed in the fourth quarter of 2009, much of it still unleased."