Demystifying Data

Manufacturing activity in New York state was little changed in March, with the headline business conditions index falling 7.3 points to -0.2, right under the threshold that indicates contraction. The new orders index edged up 0.6 points to 6.4, while the shipments index moved down 5.9 points to -6.9. Unfilled orders increased 1.7 points to 10.8, while inventories ticked down 0.2 points to 6.9, indicating business inventories are growing but at a slightly slower pace. Delivery times lengthened, and supply availability worsened, declining 2.9 points to -3.9.

Employment increased in March, with the index for the number of employees rising 1.8 points to 5.8. At the same time, the average employee workweek index ticked down to 1.9 from 2.1, signaling a slower pace of increase in hours worked in March. The prices paid index fell 12.5 points to 36.6, while the prices received index edged down 0.8 points to 21.4, reflecting a slower pace of increase in both prices paid and prices received.

In March, firms’ optimism regarding the future declined but remained positive, with the future business activity index decreasing 3.7 points to 31.0. In the next six months, new orders are expected to rise but at a slower pace compared to the prior month at 29.1. The future employment index moved down 3.9 points to 22.2, suggesting an anticipated slower pace of employment growth over the next six months. Meanwhile, input and selling price expectations are forecasted to increase at a slower pace, dropping from 57.6 to 43.1 and from 40.3 to 32.4, respectively. Furthermore, capital spending plans strengthened from February, up from 18.2 to 21.6.

In March, Philadelphia’s regional manufacturing activity expanded for the third consecutive month, with the index for general business activity advancing from 16.3 to 18.1. This month, 39.2% of firms reported increases in activity, while 21.1% of firms noted decreases. The index for new orders moved down from 11.7 to 8.6, while the shipments index surged 21.9 points to 22.2, its highest reading since January 2025. Meanwhile, the employment and average employee workweek indexes both turned positive, rising 2.1 points to 0.8 and 14.4 points to 2.8, respectively.

The prices paid index increased from 38.9 to 44.7, while the prices received index moved up from 16.7 to 21.2 in March. 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, indicators showing expectations for future growth remained positive. After climbing 17.3 points in February, expectations for future business activity fell 2.8 points to 40.0 in March. The decline came from an increase in the proportion of firms expecting a decrease in activity (16.3%). At the same time, the proportion of firms expecting an increase in activity (56.3%) moved up in March. The future new orders index decreased from 54.1 to 49.6, while the capital expenditures index rose from 14.4 to 25.8. The future prices paid and prices received indexes declined from 54.1 to 53.7 and from 50.1 to 38.4, respectively. Additionally, the index for future employment jumped from 14.9 to 40.4.

In March, firms were asked about total production and capacity utilization in the first quarter of 2026 compared to the prior quarter. Of those responses, 51.8% reported an increase in production, while a smaller share (29.6%) noted a decrease. The median capacity utilization rate was unchanged from last quarter at 70% to 80%. When asked about which factors acted as constraints on capacity utilization, nearly half of firms (48.1%) said that uncertainty was at least a moderate constraint on capacity utilization. Looking forward, 53.6% of respondents expect the impact of energy markets to worsen, while 40.7% forecast the impact from uncertainty to worsen.

The Producer Price Index for final demand (also known as wholesale prices) jumped 0.7% over the month in February, up from the 0.5% increase in January and significantly above expectations. Over the year, producer prices climbed 3.4% in February, up from 2.9% in January and the largest 12-month increase since February 2025. Meanwhile, prices for final demand excluding foods, energy and trade services grew 0.5% over the month in February after rising 0.4% in January. Prices for these goods advanced 3.5% from February 2025.

Within final demand, prices for services rose 0.5% in February, after advancing 0.8% in January. Meanwhile, prices for goods soared 1.1% in February, the largest monthly increase since August 2023, after edging down 0.2% in January. Within the final demand services index, prices for traveler accommodation services surged 5.7%, accounting for about 20% of the February increase. Within the final demand goods index, prices for fresh and dry vegetables jumped 48.9%, accounting for over 20% of the February rise. At the same time, prices for industrial material handling equipment climbed 0.1% from January and 6.1% from February 2025.

Prices for processed goods for intermediate demand rose 1.6% in February, the largest monthly increase since August 2023, after staying the same in January. Within the index, prices for diesel fuel soared 13.9% after declining 1.1% in January. Meanwhile, prices for steel mill products and aluminum mill shapes advanced 3.0% and 5.7% from January and 20.9% and 39.1% from February 2025, respectively. Over the year, the index rose 4.0%, the largest annual increase since December 2022.

Meanwhile, prices for unprocessed goods for intermediate demand jumped 3.1% in February, the largest monthly increase since January 2025, after moving up 0.9% in January. The monthly rise was led by a 10.9% leap in natural gas prices, which surged 30.0% over the year. In contrast, prices for raw milk fell 9.1% in February and 33.3% from February 2025. Over the year, prices for unprocessed goods for intermediate demand decreased 1.7%, after declining 4.5% in January.

As anticipated, the Federal Open Market Committee maintained its interest rate target range at 3.50%–3.75% at its March meeting. On the other hand, one FOMC member—Stephen Miran—dissented, preferring to lower the target range by 25 basis points. In a change to its previous statement, the FOMC noted that the implications of developments in the Middle East for the U.S. economy are uncertain.

In the press conference following the meeting, Federal Reserve Chairman Jerome Powell noted that economic activity continues to expand at a solid pace, with job gains staying low while inflation remains elevated. Chairman Powell noted that the higher energy prices due to events in the Middle East will push up prices in the near term, but it is too soon to know the scope and duration of the potential effects on the economy. He reaffirmed that the FOMC is well positioned to determine the extent and timing of additional adjustments to its policy stance.

The FOMC’s summary of economic projections, which maps out the Federal Reserve’s expectations for where interest rates may be headed in the future, signaled a somewhat less mixed stance compared to the December summary. Twelve Federal Reserve officials project there will be additional rate cuts across 2026, while seven anticipate no additional rate cuts this year. A majority of the officials who predict a rate cut this year anticipate just one 25-basis-point cut across 2026. Meanwhile, the projections show that officials still expect inflation to remain elevated, averaging 2.7% in 2026, more so than the 2.4% average projected in December. At the same time, the projections show officials expect real GDP to rise slightly more in 2026 than previously anticipated.

New orders for manufactured goods inched up 0.1% in January following a 0.4% decrease in December. Meanwhile, new orders for manufactured goods grew 3.5% over the year. When excluding transportation, new orders rose 0.4% over the month and 0.6% year-over-year in January. Orders for durable goods stayed the same following a 0.9% decline in December. Year to date, durable goods orders jumped 9.1%. Nondurable goods orders advanced 0.3% in January after ticking up 0.1% in December. Nondurable goods orders decreased 1.8% over the year.

New orders for ships and boats led the rise in durable goods orders, surging 10.9% following December’s 5.8% drop. In January, the largest monthly decrease occurred in defense aircraft and parts, which plummeted 23.8% after gaining 11.8% in December. The largest over-the-year changes occurred in nondefense aircraft and parts (up 93.8%) and metalworking machinery (down 8.9%).

Factory shipments rose 0.5% in January after increasing 0.7% in December. Shipments over the year grew 1.4%. Shipments excluding transportation moved up 0.4% in January following a 0.5% gain the previous month. Shipments for durable goods stepped up 0.6% following a 1.2% rise in December and are up 4.8% year to date. Meanwhile, nondurable goods shipments increased 0.3%, after ticking up 0.1% the prior month, and have declined 1.8% year to date.

Unfilled orders for all manufacturing industries increased 0.8% in January after rising 0.9% in December. Unfilled orders over the year jumped 11.1%. Inventories stepped up 0.8% year-over-year. The inventories-to-shipments ratio edged down from 1.56 to 1.55 in January. Meanwhile, the unfilled orders-to-shipments ratio for durable goods stayed the same at 7.01 from December.

Industrial production increased 0.2% in February, while manufacturing output rose by the same amount after expanding 0.8% in January. At 97.6% of its 2017 average, manufacturing production advanced 1.3% from February 2025. Capacity utilization for manufacturing was 75.6%, unchanged from January but up 1.1% over the past year. Capacity utilization remained 2.6 percentage points below its long-term average from 1972 to 2025.

In February, major market groups posted mixed results. Consumer goods production stayed the same, while business equipment output increased 0.2%. The gain in production of consumer durables (up 0.4%) was led by the output of appliances, furniture and carpeting rising 1.5%. Meanwhile, the index for consumer nondurables moved down 0.1%, led by a decline in the index for clothing (down 0.4%). Among business equipment, the 2.8% gain in transit equipment led the increase. At the same time, the index for materials improved 0.3%, while the index for construction supplies declined 0.2% and the index for business supplies ticked up 0.1%.

Durable goods manufacturing advanced 0.1% in February and 2.4% from the year prior. Monthly growth was greatest for motor vehicles and parts (up 1.7%), while machinery posted the largest decline (down 1.2%). Meanwhile, led by a 0.9% gain in chemicals output, nondurable manufacturing edged up 0.2% in February and 0.3% from February 2025.

Building permits declined 5.4% in January and 5.8% over the year. Permits for single-family homes in January decreased 0.9% and 11.6% over the year. On the other hand, permits for buildings with five or more units plummeted 13.4% in January but rose 8.9% over the year.

In January, housing starts jumped 7.2% in January and 9.5% over the year. On the other hand, starts for single-family homes dropped 2.8% from December and 6.5% over the year. Meanwhile, starts for buildings with five or more units surged 29.1% over the month and 56.9% over the year.

Housing completions increased 4.8% over the month but fell 7.5% over the year. Single-family home completions stepped down 1.0% from December and 3.3% from January 2025. At the same time, completions for buildings with five or more units jumped 16.2% but plunged 15.6% from one year ago.

Existing home sales rose 1.7% in February but fell 1.4% over the year. Housing inventory moved up to 1.29 million units, increasing 2.4% from January and 4.9% from last year. The median existing home price was $398,000, up 0.3% from last year. The Midwest, South and West posted monthly increases in existing home sales, while the Northeast registered a decline in February.

Single-family home sales advanced 2.5% from January but fell 1.1% from February 2025, with the median price ticking up 0.2% from last year to $401,800. Condo and co-op sales declined 5.3% over the month and 5.3% over the year to 360,000 units in February. Meanwhile, the median price for condos and co-ops inched up 0.9% from the prior year to $358,100.

Homes were typically on the market for 47 days in February, up from 46 days in January and 42 days in February 2025. First-time buyers made up 34% of sales in February, up from 31% in January and in February 2025.

The NFIB Small Business Optimism Index inched down 0.5 points to 98.8 in February, remaining just above the 52-year average of 98. February’s decrease was due primarily to a decline in sales expectations, which more than offset a jump in earnings trends. Of the 10 components included in the index, three increased, four decreased and three stayed the same. Meanwhile, the Uncertainty Index fell 3 points to 88, still well above the 51-year average (68) and above the average since 2016 (80).

Taxes were again cited as the top concern for small business owners, with 19% reporting them as the most important problem, up 1 point from January. The share of business owners reporting labor quality as the top problem fell 1 point from January to 15%, with 33% struggling to fill open jobs and 54% reported hiring or trying to hire in February. Meanwhile, inflation ranked third in the list of concerns, with 12% reporting it as their top problem, unchanged from January, with a net 24% raising prices.

A net 34% of small business owners reported raising compensation, up 2 points in February after moving up 1 point in January. Meanwhile, 22% of business owners plan to increase compensation in the next three months, unchanged from January. Pressure on profitability weakened in February, with positive profit trends rising 7 points from January to a net negative 14%. Among owners reporting lower profits, 28% blamed weaker sales, 19% mentioned usual seasonal changes, 13% cited increased material costs, 7% noted labor costs and the same percentage mentioned insurance costs. Meanwhile, 5% reported their last loan was harder to get than previous attempts, up 2 points from January, and a net negative 3% of owners cited paying a higher interest rate on their most recent loan, up 3 points from the prior month.

The outlook for general business conditions declined 3 points to 18%, remaining above the historical average of 4%. Furthermore, expectations for better business conditions are down 19 points from February 2025. At the same time, 15% reported that it is a good time to expand their business, unchanged from January and a rather weak reading compared to times of economic expansion. Overall, growth remains robust while the labor market falters, as small business owners continue to anticipate economic conditions to remain more moderated.

Job openings for manufacturing increased by 69,000 to 495,000 in January. On the other hand, the December job openings level of 426,000 was revised downward from 433,000 in the previous report. Nondurable goods job openings in January rose by 16,000 to 155,000, while durable goods job openings climbed by 53,000 to 340,000. The manufacturing job openings rate jumped to 3.8% from 3.3% in December and 3.4% the previous year. The rate for nondurable goods manufacturing advanced 0.3 percentage points to 3.1% and 0.7 percentage points to 4.2% for durable goods manufacturing.

In the larger economy, the number of job openings rose to 6.9 million, an increase of 396,000 from December but a decline of 485,000 from the previous year. The job openings rate ticked up to 4.2% from 4.0% in December and edged down from 4.5% in January 2025. This data reflects an overall labor market that has eased back to pre-pandemic levels but remains relatively tight from a historical perspective.

The number of hires in the overall economy inched up 22,000 to 5.3 million in January and 56,000 from the previous year. The hires rate for the overall economy stayed the same in January at 3.3%. Meanwhile, the hires rate for manufacturing ticked up 0.1 percentage point to 2.3%, down from 2.5% in January 2025. The hires rate for durable goods increased 0.2 percentage points to 2.2%, while the hires rate for nondurable goods declined 0.1 percentage point to 2.6%.

In the larger economy, total separations, which include quits, layoffs, discharges and other separations, declined 98,000 from December to 5.1 million and 136,000 from the previous year. The total separations rate edged down 0.1 percentage point to 3.2% for the overall economy and by the same amount for manufacturing to 2.3%, down from 2.6% from the year prior. Within that rate, layoffs and discharges increased by 7,000 in January for manufacturing, while quits decreased by 18,000. The quit and layoff rates continue to remain lower for manufacturing than the total nonfarm sector.