View Economic Notes (pdf)

Comptroller William C. Thompson, Jr. today released his quarterly publication , Economic Notes , which shows the City's economy outpaced the nation's in the first quarter of 2005 (1Q05), marking the sixth consecutive quarter of economic growth. However, the report cautions that this growth is clouded by a rise in the inflation rate, which is the highest the City has seen since the early 1990's.

According to the publication, New York City 's Gross City Product (GCP) – an inflation-adjusted measure of the overall City economy – shows the City's economy grew by 4.0 percent compared with the nation's Gross Domestic Product (GDP) growth of 3.5 percent in the first quarter. This growth can be attributed to a surge in tourism, high-value added services, and incomes.

The report also noted that the City experienced an inflation rate of 4.1 percent in 1Q05, one of the highest rates since 1991. The nation's inflation rate was 3.0 percent. In eight out of 11 categories (including housing, food and beverages, and apparel), the city's prices rose faster than those of the nation's. The price of energy in the City increased the most, to 11.1 percent.

“The City's high rate of inflation demonstrates a widening of the gap in the cost of living between New York City and the rest of the nation,” Thompson said. “Although the City's key economic indicators, such as Payroll-Jobs Growth and Personal-Income Tax Growth, grew this quarter, the inflation rate could weaken the City's growth and further broaden the disparity between New York City and the nation.”

The City's other leading economic indicators – the business conditions index, the number of building permits and help-wanted advertising index – each increased and showed improvement on a year-over-year basis. In addition, the City's real estate market improved for the fifth consecutive quarter as vacancy rates declined from 12.2 percent in 1Q04 to 10.4 percent in 1Q05, a trend revealed in all three business districts in Manhattan . However, the report suggests Downtown Manhattan continues to be a weaker area and indicates that owners may have to decrease rents to fill vacant space.

Wall Street is expected to benefit in the first quarter from low long-term interest rates. Profits for the first quarter of 2005 are projected by the Securities Industry Association at $5.7 billion, which is higher than the $5.1 billion in profits that Wall Street earned in the first quarter of 2004.

Economic Notes also includes the following New York City data:

•  New York City 's 1Q05 economy outpaced the nations'. Real Gross City Product (GCP), a measure of the overall City economy, grew in 1Q05 at an inflation-adjusted annual rate of 4.0 percent, faster than U.S. GDP growth (preliminary) of 3.5 percent. GCP grew for the sixth consecutive quarter; both incomes and jobs rose. Of five key economic indicators for the City and nation, a majority improved. The City outlook is clouded by higher inflation and short-term interest rates.

•  Payroll jobs in the City, seasonally adjusted, grew 17,000 in 1Q05, more than twice 4Q04 growth of 7,700. The City's 1.9 percent annualized 1Q05 job growth exceeded the nation's 1.6 percent and virtually all gains were in the private sector. The City's job growth ranked ninth highest of the 20 largest U.S. metro areas.

  •  Personal income tax revenues (PIT) ros e 8 percent in 1Q05 vs. 1Q04, slower than in 4Q04 (vs. 4Q03). Estimated-tax payments on interest income, rental income, and capital gains rose 33.6 percent. The more broadly based withholding taxes rose 11.4 percent. U.S. PIT revenues rose 9.5 percent in 1Q05 (vs. 1Q04), faster than 7.6 percent in 4Q04.

  •  New York City inflation rose to 4.1 percent in 1Q05 from 3.8 percent in 4Q04. New York City 's core inflation (excluding food and energy prices) rose to 3.7 percent in 1Q05, from 2.9 percent in 4Q04. U.S. inflation fell to 3.0 percent as core inflation rose to 2.3 percent.

  •  New York City 's unemployment rate fell to 5.7 percent, seasonally adjusted, in 1Q05 (the lowest since 5.5 percent in 2Q01), as U.S. unemployment fell to 5.3 percent (the lowest since 4.8 percent in 3Q01). Seasonally adjusted, 16,400 more New Yorkers were working in 1Q05 than in 4Q04. The New York City employment/population ratio in 1Q05 was the lowest since 4Q00. New York City 's unemployment rate was ninth lowest of the 20 largest U.S. metro areas.

  •  Average Manhattan commercial vacancy rates fell in 1Q05 for the fifth consecutive quarter to 10.5 percent, from the 1Q04 rate of 12.2 percent, implying rising demand and higher rents. The average Manhattan commercial rent rose slightly to $40.28 per square foot in 1Q05 (from $40.06 in 1Q04) and rents increased in Midtown and Midtown South. In Downtown Manhattan the vacancy rate fell the least and average rents decreased, suggesting weaker demand.

  •  Leading economic indexes improved. The New York City business-conditions index increased 27.7 percent in 1Q05 from 1Q04. The number of building permits authorized rose 8.1 percent. The City's quarterly help-wanted-advertising index rose 16 percent.

Summary Table. Five Key Economic Indicators, NYC and U.S. , 1Q05

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