Activity declined significantly in the region’s service sector, according to firms responding to the Federal Reserve Bank of New York’s May 2023 Business Leaders Survey. The survey’s headline business activity index fell seven points to -16.8. The business climate index was little changed at -45.8, suggesting the business climate remains much worse than normal. Employment edged slightly higher despite the decline in activity. Wages and input prices increased at about the same pace as last month, while selling price increases picked up. Looking ahead, firms expect conditions to improve only somewhat over the next six months.
Activity Continues to Contract
Business activity declined in the region’s service sector for an eighth consecutive month, according to the May survey. The headline business activity index fell seven points to -16.8, pointing to a sharper pace of decline than last month. Twenty-one percent of respondents reported that conditions improved over the month and 38 percent said that conditions worsened. The business climate index held steady at -45.8, suggesting that the business climate remains much worse than normal.
A Slight Increase in Employment
The employment index edged up to 5.0, pointing to a small increase in employment. The wages index was little changed at 40.4 and the prices paid index held steady at 60.1, indicating that wages and input prices increased at about the same pace as in April. The prices received index rose six points to 27.7, signaling a modest pickup in selling price increases. Capital spending grew.
A Minority of Firms Expect Conditions to Improve
The index for future business activity climbed to 10.1, though only a third of respondents expect conditions to improve over the next six months. The index for the future business climate was unchanged at -18.4. Employment is expected to grow modestly in the months ahead, and wage and price increases are expected to remain widespread.