Oct 16 (Reuters) - Service sector business leaders reported widespread pricing woes in October and a downbeat outlook for activity, according to a report released Friday by the Federal Reserve Bank of New York.
“The pace of input price increases remained sharp, and selling price increases picked up to the fastest pace since 2022,” the bank said in its latest Business Leaders Survey, opens new tab for the current month, adding “supply availability continued to worsen.”
The price pressures faced by the company leaders came as the report found that the business climate was “much worse than normal” with firms becoming more pessimistic about the outlook. Current business activity also weakened, with the headline index dropping 12 points to negative 20.7, the weakest reading since March, the report said.
The sour mood captured by the New York Fed survey contrasts with other data that shows strong economic activity, low and steady unemployment and robust levels of investment tied to the technology sector.
That said, the survey’s downbeat findings on inflation mirror a raft of statistics showing price pressures remain strong amid the ongoing impact of President Donald Trump’s trade tariffs and the US-Israeli war in the Middle East that’s driven surging energy costs.
High inflation drove the Fed to hike rates last month and it’s very likely to do so again by year’s end, though in comments late Thursday, Fed Chairman Kevin Warsh offered no guidance, saying “I don't prejudge meetings...I don't believe in saying now what I might do at the meetings that we have in the balance of this year."
Chicago Fed leader Austan Goolsbee, in a Yahoo Finance interview on Wednesday, said a consumer level inflation report released on Wednesday was “discouraging” and noted “if you break out the components, services inflation shows little sign of improvement.”
“We’re going to need to keep a close eye” on that part of the price pressure landscape “because that's not really coming from supply shocks,” Goolsbee said.
The NY Fed survey pointing to rough price pressures came as the government reported a surge in import prices in September, with those costs rising by a much bigger than expected 1.1% rate.
The Business Leaders survey also pointed to “weak” capital spending plans and while noting "supply availability is expected to continue to worsen.”
The sour turn in the October Business Leaders survey, joined with other regional data from the bank, points to an uneven environment in the New York area. The bank’s October Empire State, opens new tab factory survey, released Thursday, saw the overall business conditions index rise to its highest level in five years amid “elevated” input and selling prices and supply-related challenges.
Reporting by Michael S. Derby; Editing by Chizu Nomiyama
