• The Empire State Manufacturing Index fell to -9.2 in May 2025, missing estimates of -8 and marking the second straight month in contraction territory.
  • Input and selling prices rose to multi-year highs, amplifying cost pressures amid sluggish demand.
  • Firms remain pessimistic about future conditions, with the outlook index near historic lows.

Manufacturing Woes Deepen in New York

The Empire State Manufacturing Index slipped further into negative territory in May, dropping to -9.2 from April's -8.1 reading. The result undershot consensus expectations of -8, reinforcing concerns about prolonged weakness in New York's industrial sector. While not as severe as March's -20 plunge, the persistent contraction highlights ongoing challenges for regional manufacturers grappling with softening demand and mounting cost pressures.

New orders and shipments continued to decline, though unfilled orders saw a modest uptick. Supply availability deteriorated further, compounding operational hurdles. "The data suggests manufacturers are facing a perfect storm of weak demand, rising costs, and supply chain headaches," said one industry analyst familiar with the report. Attempts to reach New York Fed officials for comment were unsuccessful.

Inflation Bites as Outlook Darkens

Price pressures intensified sharply, with both input costs and selling prices accelerating to their highest levels in over two years. The price indexes have now risen for four consecutive months, reflecting persistent inflationary pressures even as activity contracts. Employment levels held steady but average work hours declined, signaling cautious workforce management.

Business optimism cratered, with the six-month outlook index hovering near historic lows. Few firms expect conditions to improve in the coming months, and capital expenditure plans remain stagnant. The gloomy sentiment mirrors broader concerns about manufacturing weakness spreading through the US economy. Regional Fed surveys from Philadelphia and Richmond have shown similar softness in recent months.

Correction: An earlier version misstated the previous month's index reading. April's figure was -8.1, not -8.0.