The numbers: The New York Fed’s Empire State business conditions index, a gauge of manufacturing activity in the state, plummeted 36.2 points to negative 11.6 in May, the regional Fed bank said Monday.
The index had jumped to 24.6 in April after three soft months.
Economists had expected the index to fall slightly to a solid 16.5 reading, according to a survey by The Wall Street Journal.
Any reading below zero indicates deteriorating conditions.
Key details: In May, the details of the report mirrored the weakness in the headline index as both new orders and shipments declined sharply.
The new-orders index dropped 33.9 points to negative 8.8 in May, and the shipments index plummeted 49.9 points to negative 15.4.
Unfilled orders fell 14.7 points to 2.6 in May while delivery times slipped 1.6 points to 20.2.
There were declines in both input and selling prices but not enough to signal any cooling of inflationary pressures.
The prices received indexes inched down 3.5 points to 45.6 in May. The prices paid index fell 12.7 points to a still-elevated 73.7.
Both employee indexes improved slightly in May.
Firms were slightly more optimistic about the next six months, with the future business conditions index rising 2.8 points to 18.
Big picture: The decline is not a good signal for the economic outlook. This is the second negative reading in three months. Supply-chain woes and higher prices may finally be cooling off demand.
Economists use the data as an early read on the health of the manufacturing sector. In April, the national ISM manufacturing index fell to 55.4%, the lowest reading since July 2020.
Market reaction: Stocks
were set to open lower Monday in reaction to weak economic data from China.