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NEW YORK (Reuters) - The New York Federal Reserve said on Monday its barometer on business activity in New York state unexpectedly fell in May, sinking into negative territory for the first time since October, prior to the U.S. presidential election.
The regional Fed's "Empire State" index on current business conditions declined to -1.0 from +5.2 in April. Analysts polled by Reuters had forecast a reading of +7.0 for May.
Analysts cautioned the index's downturn may be a harbinger of a possible deterioration in the manufacturing sector.
"We have been expecting some cooling in the manufacturing sector following a solid start to the year, but if the Empire State survey’s orders index proves to be a reliable forward-looking indicator, the slowdown could be more severe than we had been anticipating," J.P. Morgan economist Daniel Silver wrote in a research note.
The New York Fed index reached +18.7 in February, which was the highest since September 2014, propelled by hopes that Donald Trump's capture of the White House together with a Republican-controlled Congress would result in tax reform, infrastructure spending and looser regulations which would boost the economy.
That optimism on fiscal stimulus from Washington has diminished in recent weeks as the administration and leading Republican lawmakers have been slow in making progress on these major economic legislations.
The New York Fed survey's component on new orders, a proxy on future business activity, also sagged into the red to -4.4, the weakest level since September from +7.0 in April.
The employment gauge slipped to +11.9 from +13.9, while its six-month outlook index softened to +39.3 from +39.9.
Reporting by Richard Leong; Editing by Chizu Nomiyama