NEW YORK (Reuters) - The New York Federal Reserve said on Monday its gauge of business growth in New York state posted a record fall this month to its weakest level in more than 2-1/2 years, suggesting an abrupt contraction in regional activity.
U.S. business sentiment has sagged on escalating trade tensions between China and the United States and signs of some softness in the labor market. Some of those concerns have been offset by hopes the Federal Reserve would lower short-term interest costs to boost borrowing and demand.
The regional Fed’s “Empire State” index on current business conditions tumbled to -8.6 in June from 17.8 in May. This was the first negative reading since October 2016 when it was -9.2.
Analysts polled by Reuters had forecast a reading of 10.0 for March.
A reading below zero suggests a contraction in regional business activity.
“Business activity took a sharp turn downward in New York State,” the regional central bank said of the latest figures.
(Graphic: New York Fed Empire business survey interactive - tmsnrt.rs/2XYNy6E)
The sharp deterioration was led by a pullback in new orders and employment, which fell to -12.0 and -3.5 in June from 9.7 and 4.7 in May, respectively.
The new orders figure reached a three-year low last month.
The report’s six-month outlook index fell to 25.7 from 30.6 in May.
The June reading on prices paid ticked up to 27.8 from 26.2.
“We’re likely seeing a huge hit from rising trade war fears and financial market setbacks through May, as last month’s survey was likely too-early in the month to capture the impact,” Michael Englund, chief economist at Action Economics wrote in a research note.
“The drop will be problematic if mimicked by the other sentiment reports for June, though for now we will attribute the out-sized decline to volatility in this survey,” he added.
Reporting by Richard Leong; Editing by Susan Thomas