After an unexpected surge into growth territory in April, the New York Fed’s Empire State business conditions index plunged 42.6 points in May to minus 31.8.
Economists had forecast a milder slump to negative two.
Readings below zero indicate worsening conditions. The May decline is the sharpest on record apart from the initial lockdown months of the pandemic.
The index for new orders nosedived 53.1 points to negative 28, more than reversing the 46.7 point rise in April. The shipments index also fell sharply into negative territory. The inventories index dropped, indicating that inventories moved lower.
Employment continued to fall for the fourth consecutive month and the average workweek declined.
Troublingly, the decline in demand and employment did little to lower inflation. The prices paid index was little changed at 34.9, and the prices received index held steady at 23.6, suggesting the pace of price increases was little changed and remains elevated.
The expectations index showed businesses continued to expect little improvement in conditions over the next six months.
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