Economic Data and Growth

Building permits increased 5.8% in April but ticked down 0.2% over the year. Permits for single-family homes in April declined 2.6% and 5.5% over the year. On the other hand, permits for buildings with five or more units surged 22.7% from March and 11.5% over the year.

In April, housing starts decreased 2.8% from March but rose 4.6% over the year. Starts for single-family homes fell 9.0% from March and 2.4% over the year. Meanwhile, starts for buildings with five or more units advanced 14.3% over the month and 23.3% over the year.

Housing completions stepped up 4.8% over the month but slipped 2.0% over the year. Single-family home completions decreased 1.0% from March and 7.0% from April 2025. At the same time, completions for buildings with five or more units climbed 16.5% over the month and 6.4% from one year ago.

In May, Philadelphia’s regional manufacturing activity contracted slightly after four consecutive months of growth, with the index for general business activity falling from 26.7 to -0.4. This month, 22.9% of firms noted decreases in activity, while 22.5% reported increases. New orders declined, moving from 33.0 to -1.7, while shipments grew at a slower pace, dropping from 34.0 to 4.9. Meanwhile, the employment index improved but remained negative, increasing 2.3 points to -2.8, and the average employee workweek stepped down 6.5 points to 1.2.

The prices paid and prices received indices declined in May, decreasing from 59.3 to 47.9 and from 33.5 to 26.3, respectively. As has been the case for many months, the prices received index remained lower than the prices paid index, indicating that manufacturers have been absorbing a portion of higher costs paid.

Looking ahead, most indicators showing expectations for future growth rose in May. After ticking up 0.8 points in April, expectations for future business activity climbed 12.4 points to 53.2 in May. The rise primarily came from a gain in the proportion of firms expecting increases in activity (66.5%). At the same time, the number of firms anticipating a decrease in activity (13.2%) was lower in May. The future new orders index advanced from 45.7 to 53.5, and the future shipments index moved up from 40.8 to 45.7. On the other hand, the capital expenditures index fell from 35.2 to 30.9. The future prices paid and prices received indices increased from 50.2 to 70.0 and from 50.2 to 60.5, respectively. Additionally, the index for future employment stepped down from 35.9 to 31.7.

In May, firms were asked about changes to core customers’ price sensitivity and anticipated cost changes. Of those responses, 42.3% of firms view core customers as more price sensitive since the prior quarter, up from 30.8% when this question was asked in February. Meanwhile, 48.0% of firms expect near-term price changes in their industry’s costs, while 52.0% do not. When asked about how they anticipate competitors to respond, 75.0% anticipate them to raise prices in the near term, while none believe they will lower prices. Looking forward, those who anticipate a price change from their competitors estimate that they will change prices in three months.

Manufacturing activity grew at a slightly slower pace in the Tenth District in May, with the month-over-month composite index decreasing to 8 in May from 10 in April. Meanwhile, expectations for future activity ticked up 1 point to 19. The month-over-month activity slowdown was due to a decline in growth of durable manufacturing, which offset a gain in nondurable manufacturing. At the same time, the majority of the indices remained positive but grew at a slower pace in May. The Tenth Federal Reserve District encompasses the western third of Missouri; all of Kansas, Colorado, Nebraska, Oklahoma and Wyoming; and the northern half of New Mexico.

The production and shipments indices remained positive but slowed, declining from 10 to 9 and from 15 to 7, respectively. Meanwhile, new orders ticked up from 12 to 13, while the employment index turned negative, falling from 2 to -4 in May. The backlog of orders index jumped from 2 to 14. At the same time, the pace of growth for prices paid was unchanged at 63, while prices received advanced 4 points to 29. Furthermore, the indices for prices received and paid both increased over the year, rising to 72 and 89, respectively.

In May, survey respondents were asked special questions about changes in input and output prices and hiring and capital investment plan changes. Nearly two-thirds (65%) reported their input prices are changing more often than last year, compared to one-quarter seeing the same pace of changes and 10% citing less frequent changes. When asked about output prices, 33% reported output prices changing more often, 53% noted the same pace and 14% mentioned less changes. When asked about hiring, 22% expect to hire more workers, 20% expect to hire less and 58% have not changed their hiring plans since the start of the year. Further, 23% expect to decrease capital investments, 15% plan to increase capital investments and 62% have not changed their capital investment plans since the start of the year.

The NFIB Small Business Optimism Index edged up 0.1 point to 95.9 in April, remaining below the 52-year average of 98. April’s increase was due to improvements in most indices, with the largest uptick in earnings trends, which were partially offset by a notable decline in expected business conditions. Of the 10 components included in the index, seven increased and three decreased. Meanwhile, the Uncertainty Index fell 4 points to 88, still well above the 51-year average (68) and above the average since 2016 (80).

Labor quality was cited as the top concern for small business owners, with 18% reporting it as the most important problem, up 3 points from March. Among respondents, 34% reported they were struggling to fill jobs and 53% were hiring or trying to hire in April, both up from March. The share of business owners reporting taxes as the top problem fell 2 points from March to 17%. Meanwhile, inflation ranked third in the list of concerns, with 16% reporting it as their top problem, up 2 points from March, with a net 30% of owners raising prices.

A net 30% of small business owners reported raising compensation, down 3 points in April after moving down 1 point in March. Meanwhile, 18% of business owners plan to increase compensation in the next three months, unchanged from March. Pressure on profitability weakened in April, with positive profit trends rising 6 points from March to a net negative 19%. Among owners reporting lower profits, 33% blamed weaker sales, 15% mentioned usual seasonal changes, 13% cited rising material costs, 9% noted labor costs and the same percentage mentioned price changes on their products or services. Meanwhile, 3% of owners reported that their last loan was harder to get than previous attempts, down 2 points from March, and a net 2% of owners cited paying a higher interest rate on their most recent loan, up 5 points from the prior month.

The outlook for general business conditions declined 7 points to 4%, in line with the historical average. Furthermore, expectations for better business conditions are down 11 points from April 2025. At the same time, 7% reported that it is a good time to expand their business, down 4 points from March and a weak reading compared to times of economic expansion. Overall, small business owners remain relatively pessimistic about the outlook as expected business conditions fell for the fourth consecutive month and to its lowest level since October 2024.

Manufacturing activity in New York state expanded in May, with the headline business conditions index rising 8.6 points to 19.6, the highest reading since April 2022. The new orders index increased 3.4 points to 22.7, while the shipments index declined 1.3 points to 18.9, both remaining at high rates of growth for the second consecutive month. Unfilled orders decreased 4.2 points to 4.9, while inventories moved up 4.6 points to 9.7, indicating business inventories are growing at a faster pace. Delivery times lengthened to a four-year high, climbing 8.3 points to 20.4, and supply availability worsened slightly, edging down 0.6 points to -10.7.

Employment increased at a slower rate in May, with the index for the number of employees falling 1.5 points to 8.3. At the same time, the average employee workweek declined to 11.5 from 13.7, signaling a smaller increase in hours worked in May. The prices paid index jumped 11.6 points to 62.6, while the prices received index soared 10.0 points to 31.8, reflecting the fastest pace of increase in both prices paid and prices received since 2022.

In May, firms’ optimism regarding the future improved notably, with the future business activity index rising 13.9 points to 33.5. In the next six months, new orders are expected to rise at a faster pace compared to the prior month at 30.1. The future employment index moved up 2.5 points to 20.6, suggesting an anticipated faster pace of employment growth over the next six months. Meanwhile, input and selling price expectations are forecasted to increase at a faster pace, rising from 61.6 to 62.1 and from 38.6 to 43.6, respectively. Furthermore, capital spending plans strengthened in May, increasing from 13.1 to 15.5.

U.S. import prices increased 1.9% in April, after rising 0.9% in March, with higher fuel and nonfuel prices driving the increase. Over the year, import prices advanced 4.2% in April, the largest 12-month increase since October 2022. Meanwhile, U.S. export prices stepped up 3.3% in April, driven by higher prices for nonagricultural and agricultural exports. Over the past year, export prices rose 8.8%, the largest over-the-year increase since September 2022.

In April, U.S. import prices for manufacturing moved up 3.5% over the year, although about half of the industry experienced price decreases. Petroleum and coal products manufacturing experienced the most significant over-the-year U.S. import price increase in April, surging 38.4%. On the other hand, the greatest yearly decline in U.S. import prices occurred in beverage and tobacco product manufacturing, which fell 11.2% from April 2025. Meanwhile, U.S. export prices for manufacturing advanced 6.9% over the year, with petroleum and coal products manufacturing exhibiting the largest rise (30.8%).

Fuel import prices climbed 16.3% in April, the largest monthly rise since March 2022, after increasing 10.0% in March. Higher prices for petroleum more than offset lower prices for natural gas. Import prices for petroleum and petroleum products jumped 19.0% in April. At the same time, prices for fuel imports surged 20.0% from April 2025. Meanwhile, natural gas prices plummeted 22.1% in April but edged up 0.1% over the year.

Nonfuel import prices increased 0.8% in April, after ticking up 0.2% in March. Higher prices for capital goods, nonfuel industrial supplies and materials, consumer goods and foods, feeds and beverages drove the increase. The price index grew 2.9% over the past year, the largest over-the-year gain since October 2022.

After rising 0.6% in March, agricultural export prices rose 1.6% in April. Over the past 12 months, agricultural exports advanced 4.3%, driven primarily by higher prices for soybeans and meat. Meanwhile, nonagricultural exports stepped up 3.4% in April. Higher prices for nonagricultural industrial supplies and materials, capital goods and consumer goods more than offset lower prices for automotive vehicles, parts and engines. Over the past year, nonagricultural export prices climbed 9.3%.

Industrial production rose 0.7% in April, while manufacturing output advanced 0.6% after ticking up 0.1% in March. At 97.9% of its 2017 average, manufacturing production increased 1.3% from April 2025. Capacity utilization for manufacturing was 75.8%, up 0.4 percentage points from March and 1.1% over the past year. Capacity utilization remained 2.4 percentage points below its long-term average from 1972 to 2025.

In April, production for most major market groups improved. Consumer goods production climbed 0.9%, while business equipment output jumped 1.5%. The growth in consumer durables (up 1.2%) was led by the output of automotive products rising 2.2%. Meanwhile, the index for consumer nondurables moved up 0.9%, led by an increase in the index for energy (up 2.6%). Among business equipment, the 4.2% jump in transit equipment output led the advance. At the same time, the index for materials rose 0.5%, while the index for construction supplies stayed the same and the index for business supplies ticked up 0.3%.

Durable goods manufacturing surged 1.2% in April and 3.2% from the year prior. The largest monthly gain occurred in motor vehicles and parts (up 3.7%), while furniture and related products registered the largest decline (down 1.8%). Meanwhile, led by a 2.2% decrease in apparel and leather production, nondurable manufacturing edged down 0.1% in April and 0.6% from April 2025.

The Producer Price Index for final demand (also known as wholesale prices) rose 1.4% over the month in April, up from the 0.7% increase in March. Over the year, producer prices jumped 6.0%, up from 4.3% in March and the largest 12-month increase since December 2022. Meanwhile, prices for final demand excluding foods, energy and trade services advanced 0.6% over the month in April after ticking up 0.2% in March. Prices for these goods climbed 4.4% from April 2025, the largest yearly increase since February 2023.

Within final demand, prices for services jumped 1.2% in April, the largest monthly increase since March 2022, after inching up 0.2% in March. Meanwhile, prices for goods soared 2.0% in April, after moving up 1.9% in March. Within the final demand services index, margins for machinery and equipment wholesaling rose 3.5%, a major factor in the monthly advance for this index. Within the final demand goods index, prices for gasoline surged 15.6%, accounting for over 40% of the April increase. At the same time, prices for nonferrous metals fell 0.3% from March but were still up 35.6% from April 2025.

Prices for processed goods for intermediate demand rose 2.7% in April, the sixth consecutive increase, after moving up 2.8% in March. Within the index, prices for diesel fuel jumped 12.6%, accounting for nearly a quarter of the April increase, after soaring 42.1% in March. Meanwhile, prices for primary nonferrous metals and secondary nonferrous metals were up 82.1% and 38.1% year-over-year, respectively. Over the year, prices for processed goods for intermediate demand rose 9.4%, the largest annual increase since October 2022.

Meanwhile, prices for unprocessed goods for intermediate demand climbed 4.1% in April, the sixth straight advance, after increasing 1.8% in March. Nearly 75% of the monthly rise was attributed to an 11.3% surge in crude petroleum prices, which are up 61.8% over the year. In contrast, prices for nonferrous scrap fell 4.4% in April but rose 27.9% from April 2025. Over the year, prices for unprocessed goods for intermediate demand soared 20.9% after moving up 12.5% in March.

In April, consumer prices increased 0.6% from March and 3.8% over the year, up from the 3.3% annual rise in March and the greatest over-the-year increase since May 2023. Core CPI, which excludes more volatile energy and food prices, rose 0.4% from March and 2.8% over the year, up slightly from the 2.6% 12-month increase the month prior.

Energy costs climbed 3.8% over the month in April, after jumping 10.9% in March. Over the year, energy costs surged 17.9%, after increasing 12.5% year-over-year in March. Within the energy index, gasoline prices rose 5.4% in April and 28.4% over the year, while fuel oil prices surged 5.8% month-over-month and 54.3% year-over-year. Meanwhile, electricity prices grew 2.1% in April and 6.1% from April 2025, while natural gas prices edged down 0.1% over the month but were still up 3.0% over the year.

In April, food prices advanced 0.5% over the month and 3.2% over the year, up from the 2.7% year-over-year advance in March. Prices for food at home increased 0.7% from March and 2.9% from April 2025, while prices for food away from home moved up 0.2% month-over-month and 3.6% year-over-year. Of the different food groups, beef and veal, coffee and fresh vegetables rose at the fastest pace, surging 14.8%, 18.5% and 11.5% over the year, respectively.

The shelter index climbed 0.6% from March and 3.3% over the year, up from the 3.0% annual gain in March. Meanwhile, prices for used cars and trucks stayed the same over the month but declined 2.7% over the year, while new vehicle prices ticked down 0.2% over the month but inched up 0.2% from April 2025. Relatedly, prices for motor vehicle maintenance and repair fell 0.2% month-over-month but advanced 5.1% year-over-year.

The headline inflation rate is still well above the Federal Reserve’s target of 2.0% and continues to rise from its 2025 lows, with increased pressure from the war in the Middle East. Federal Reserve officials held their interest rate target steady at their April meeting, and markets anticipate that the Federal Open Market Committee will keep its interest rate target unchanged again at the meeting next month as risks to the Federal Reserve’s inflation mandate rise.

In April, growth in global manufacturing activity strengthened from March, increasing from 51.3 to 52.6. Output and new orders both grew as the rate of manufacturing production growth hit a nearly five-year high. Meanwhile, lead times continued to slow, lengthening to the greatest extent since August 2022. Employment declined slightly for the second consecutive month, and inventory levels rose as firms prepared for anticipated supply chain disruptions and further cost increases.

Taiwan, Japan, Ireland and India had the highest PMI readings in April. On the other hand, Mexico, Russia and Turkey were some of the larger nations to register declines in activity. The accelerating growth in manufacturing production occurred across consumer, intermediate and investment goods.

Meanwhile, input and output price pressures continued to surge as output prices rose at the sharpest rate since June 2022. At the same time, business optimism remained depressed amid rising cost pressures and supply chain disruptions. Geopolitical uncertainty continued to weigh on sentiment as input costs rose at one of the fastest rates in the 28-year survey history.