New York Fed Service Index: Signals of Economic Slowdown

Sharp Decline in New York Fed Services Index

The services sector activity reported by the New York Federal Reserve (Fed) has recorded its sharpest decline since January 2021. This situation is emerging as a clear sign of a significant slowdown in the regional economy.

Contraction in the Services Sector

The service activities in the New York region experienced the fastest contraction seen in the last four years, reflecting a sharp decline in business volume and employment. The October services index dropped 4.2 points, falling to -23.6 with the data released on Thursday. This negative value clearly indicates a contraction in the sector.

Employment and Expectations

These losses in the service sector reveal that the recovery process following the pandemic has weakened. The employment indicator has shown contraction for two consecutive months, while firms' expectations regarding the business environment continue to worsen.

Outlook Deteriorating

According to the report, this situation, combined with the manufacturing data published by the regional Fed, indicates that significant changes in government policies are increasing pressures on the business world. Companies are dealing with factors such as economic uncertainty, the impact of immigration restrictions on employment, and high import tariffs.

Cost and Price Increases

Firms indicate that input costs have reached the highest levels since the beginning of 2023, while the increase in service prices is reported to be occurring at a moderate pace. However, it is stated that the outlook for service providers over the next six months is slightly less negative, though it remains at a weak level.

Expert Opinion

New York Fed Economic Research Advisor Richard Deitz commented, “Most firms do not expect conditions to improve in the coming months.”