Input Stories

Building permits fell 2.0% in May and 1.0% over the year. Permits for single-family homes in May declined 2.7% from April and 6.4% over the year. Meanwhile, permits for buildings with five or more units increased 1.4% from April and 13.0% over the year.

In May, housing starts decreased 9.8% from April and fell 4.6% from May 2024. Starts for single-family homes were largely unchanged from April, rising just 0.4%, but they dropped 7.3% from May 2024. On the other hand, starts for buildings with five or more units plummeted 30.4% over the month but rose 5.0% over the year.

Meanwhile, housing completions increased 5.4% over the month but slipped 2.2% over the year. Single-family home completions rose 8.1% from April but were similar to the May 2024 level, up just 0.1%. Completions for buildings with five or more units ticked up 0.2% over the month but fell 6.7% from one year ago.

U.S. import prices stayed the same in May, after rising 0.1% in April, with higher nonfuel prices offsetting lower fuel prices. Over the past year, import prices inched up 0.2%. Meanwhile, U.S. export prices decreased 0.9% in May, with lower nonagricultural export prices more than offsetting higher agricultural export prices. Over the past year, export prices increased 1.7%.

In May, U.S. import prices for manufacturing rose just 0.6% over the year, but there were significant divergences in prices across the industry. Petroleum and coal products manufacturing experienced the most significant U.S. import price declines in May, falling 20% over the year. On the other hand, the greatest increase in U.S. import prices in May occurred in primary metal manufacturing, which rose 11.2% over the year. Meanwhile, U.S. export prices for manufacturing in May increased 2.5% over the year.

Fuel import prices fell 4.0% over the month in May, the largest monthly decline since falling 7.2% in September 2024. Lower prices for natural gas and petroleum drove the decline. Prices for fuel imports plummeted 15.7% from May 2024, the largest over-the-year decline since September 2024. Import prices for petroleum decreased 3.7% over the month in May and 17.4% from last year. Meanwhile, natural gas prices plunged 9.0% in May but jumped 88.4% over the year.

Nonfuel import prices increased 0.3% in May, after rising 0.4% in April. Higher prices for nonfuel industrial supplies and materials, capital goods, consumer goods and automotive vehicles more than offset declines in foods, feeds and beverages. The price index for nonfuel imports grew 1.7% over the past year, led by higher prices for nonfuel industrial supplies and materials; foods, feeds and beverages; capital goods; and automotive vehicles.

After improving 0.4% in April, agricultural export prices rose 0.2% in May. Over the past 12 months, agricultural export prices increased 1.8%. Meanwhile, nonagricultural export prices slid 1.0% in May. Lower prices for nonagricultural industrial supplies and materials more than offset higher prices for capital goods, consumer goods and automotive vehicles. Over the past year, nonagricultural export prices advanced 1.7% and have not declined on a 12-month basis since September 2024.

Manufacturing activity in New York state continued to decline in June. The headline general business activity index worsened from May, falling from -9.2 to -16.0. Meanwhile, the new orders and shipments indexes contracted after growing the previous month, with new orders decreasing from 7.0 to -14.2 and shipments declining from 3.5 to -7.2. Unfilled orders also declined 13.1 points to -8.3, while delivery times inched up from 1.0 to 1.8. Inventories fell from 4.8 to 0.9, but supply availability improved from -11.4 to -8.3.

The index for the number of employees rose into positive territory, improving from -5.1 to 4.7, while the average employee workweek improved but remained negative, rising from -3.4 to -1.5. Input prices ticked down 12.2 points to 46.8 after reaching the highest level in two years last month. Meanwhile, selling prices rose from 22.9 to 26.6 points, a reflection that prices paid increased at a slower pace while the pace of prices received quickened.

Looking forward, firms’ expectations vastly improved after a gloomy outlook in May and April. The index for future business activity turned positive, rising 23.2 points to 21.2. New orders are similarly expected to increase, with the forward-looking indicator rising from -2.7 to 26.1. Nevertheless, capital spending plans fell further into negative territory, dropping 0.6 points to -7.3. Employment expectations also ticked down from 11.6 to 10.4, while the average employee workweek outlook strengthened but remained negative, rising from -4.8 to -1.8. Input prices are expected to remain high but retracted slightly from 66.7 to 59.6. On the other hand, selling price expectations rose 6.1 points to 41.3. Meanwhile, supply availability is still forecasted to contract in the next six months but at a slower pace than predicted in May.

In June, Philadelphia’s regional manufacturing activity remained weak. At -4.0, the index for current general business activity stayed the same as May. Over 28% of firms reported decreased activity this month, while 24.5% saw increases in June, an improvement from the 19.0% reporting increases in May. The index for new orders declined but remained positive, slipping from 7.5 to 2.3. On the other hand, the shipments index jumped into positive territory, rising from
-13.0 to 8.3. Nevertheless, new orders and shipments both remain below their non-recession averages. Meanwhile, employment fell into negative territory, declining from 16.5 to -9.8, the lowest reading since May 2020.

The prices paid index dropped from 59.8 to 41.4, the lowest reading since February. The prices received index also fell, from 43.6 to 29.5. As has been the case for many months, the prices received index remains lower than the prices paid index, indicating manufacturers have been absorbing a portion of those higher costs paid.

Looking ahead, indicators showed expectations for future growth have dimmed from the previous month. After soaring more than 40 points in May, expectations for future general business activity plummeted nearly 29 points to 18.3 in June. A lower proportion of firms (45.1%) expect increases in activity, compared to last month’s reading of 67.3%, while 26.8% anticipate activity will decline. Similarly, the future new orders index declined from 49.7 to 22.1, and the future shipments index weakened from 51.1 to 27.9. The capital expenditures index declined from 27.0 to 14.5. The future prices paid and future prices received indexes both edged up from 61.6 to 68.9 and 50.0 to 52.5, respectively. Nonetheless, the index for future employment remained stable, ticking up from 23.0 to 24.6.

Industrial production slipped 0.2% in May. Meanwhile, manufacturing output ticked up 0.1%. Growth in motor vehicles and parts, apparel and leather and aerospace and miscellaneous transportation equipment more than offset declines in printing and support, nonmetallic mineral products and petroleum and coal products. At 103.6% of its 2017 average, total industrial production in May rose 0.6% from the same month last year. Capacity utilization slipped to 77.4%, down 0.3 percentage points from April, but up 1.4% over the past year. Capacity remains 2.2 percentage points below its long-term average from 1972 to 2024.

In May, major market groups had mixed growth. Among consumer goods, the production of durables increased 2.0%, with the greatest improvement in automotive products (3.9%), while the index for nondurables edged down 0.8%, with the greatest drop in energy goods (-3.2%). The business equipment index advanced 0.8% in May due to a 6.4% increase in transit equipment.

Durable goods manufacturing picked up 0.4% in May, led by growth in motor vehicles and parts (4.9%) that offset decreases in nonmetallic mineral products (-1.6%) and fabricated metal products (-1.2%). Meanwhile, nondurable goods manufacturing decreased 0.2% in May. Manufacturing capacity utilization stayed the same at 76.7%, remaining 1.5 percentage points below the long-term average.

The NFIB Small Business Optimism Index rose three points in May to 98.8, remaining above the 51-year average of 98. May’s increase stemmed from a rise in expected business conditions and sales expectations. Of the 10 components included in the index, seven increased, two decreased and one stayed the same. Meanwhile, the Uncertainty Index climbed two points to 94 and remains far above the 51-year average (68) and the average since 2016 (80).

Taxes were ranked as small businesses’ top concern, with 18% reporting them as their most important problem, up two points from April. Labor quality ranked second as the top concern for many small business owners in May, with 16% reporting it as the most important problem. In May, 34% of small business owners reported jobs they could not fill, the same as April. The last time job openings were below 34% was January 2021. The challenge of filling open positions remains acute, particularly in manufacturing, transportation and construction. Inflation now ranks third with 14% reporting it as a top concern, and the last time it was below 14% was in September 2021.

A net 26% of small business owners reported raising compensation, down seven percentage points from April and the lowest reading since February 2021. Profitability remained under pressure, with a net negative 26% reporting positive profit trends, which is five points worse than in April. Of those reporting lower profits, 36% claimed weaker sales, while 13% cited increased material costs. A net 31% of small business owners planned price hikes in May, up three percentage points from April. Despite the economy showing signs of slowing, demand remains too strong to trigger widespread price reductions. Meanwhile, 4% reported their last loan was harder to get than previous attempts, down one point from April, but a net 7% of owners reported paying a higher rate on their most recent loan, up one point from the prior month.

The outlook for general business conditions rose 10 points to 25%. In spite of the increase in outlook, the share of firms saying it is a good time to expand was low, when looking at the history of the survey, despite rising one point to 10% in May. Businesses are still stumbling through mounting uncertainties, including the rocky tariff outlook and the future of tax policy, as they wait for Congress to renew tax reform.

The Producer Price Index for final demand (also known as wholesale prices) increased 0.1% over the month in May, after declining 0.2% in April. Over the year, producer prices moved up 2.6%. Meanwhile, prices for final demand excluding foods, energy and trade services edged up 0.1% over the month in May, after falling 0.1% in April. On the other hand, prices for these goods advanced 2.7% from May 2024.

In May, prices for final demand services inched up 0.1%, following a 0.4% decline in April, while prices for final demand goods rose 0.2%. The advance in final demand services is attributed to 0.4% growth in trade services, which measures margins received by wholesalers and retailers. Additionally, margins for machinery and vehicle wholesaling jumped 2.9%. Meanwhile, 80% of the increase in final demand goods arose from a 0.2% gain in final demand for goods less foods and energy. Within the index, prices for tobacco products climbed 0.9%.

Processed goods for intermediate demand rose 0.1% in May, following a 0.3% increase in April. The rise can be attributed to a 0.4% gain in the index for processed materials less foods and energy. Meanwhile, the index for processed energy goods fell 1.2%. Over the year, the index grew 1.9%, the largest 12-month increase since the 2.1% rise in February 2023.

Meanwhile, prices for unprocessed goods for intermediate demand fell 1.6% in May, marking the third decline in a row. More than 75% of the May decrease can be traced to a 3.5% drop in the prices for unprocessed energy materials. Additionally, prices for unprocessed nonfood materials less energy slipped 1.4%. Over the year, prices for unprocessed goods for intermediate demand declined 1.0%, the first 12-month decrease since dropping 2.2% in November 2024.

Consumer prices increased 0.1% over the month and 2.4% over the year in May, edging up from the 2.3% rise in April. Core CPI, which excludes more volatile energy and food prices, edged up 0.1% over the month and rose 2.8% over the year, the same as the 12-month increase in March and April.

Energy costs fell 1.0% over the month in May, driven by a 2.6% drop in gasoline, and declined 3.5% over the year. Meanwhile, fuel oil and electricity both rose 0.9% over the month, and utility (piped) gas prices climbed 15.3% over the year.

Food prices increased 0.3% over the month in May, with prices for food at home and food away from home rising at the same rate, and were up 2.9% over the year in May. The indexes for major grocery store food groups were mixed, with half increasing and the other half decreasing. Over the year, the index for food at home advanced 2.2%, driven by a 6.1% increase in the meats, poultry, fish and eggs index.

Shelter grew 0.3% over the month and 3.9% over the year, dipping slightly from the 4.0% 12-month increase in April. Meanwhile, prices for transportation services slipped 0.2% over the month but rose 2.8% over the year, with airline fares leading the monthly decline, falling 2.7% in April and 7.3% since April 2024. These decreases offset increases in motor vehicle insurance, which rose 0.7% over the month and 7.0% over the year.

Since May 2024, the over-the-year headline inflation rate has trended downward, but the risks and expectations of higher inflation have risen. Therefore, markets are anticipating that the Federal Open Market Committee will keep rates steady, as it did in May, at its meeting later this week. On the other hand, the expectation to cut rates later in the year are rising as inflation risks remain muted and weakness in the labor market have increased slightly.

The S&P Global U.S. Manufacturing PMI was 52.0 in May, the fifth consecutive month of growth and up from 50.2 in April. PMI growth was led by a rise in new orders and a dramatic increase in input inventories, which rose at a pace not seen in the indicator’s 18-year history even amid higher prices. Domestic demand was the primary driver to new order growth, along with efforts to frontload production ahead of greater tariff impacts. Additionally, optimism increased slightly after falling sharply in April, and employment advanced for the first time in three months. On the other hand, production declined for the third month in a row and at a slightly faster pace than in April.

Tariffs led to steep increases in both input and output costs, which rose at the highest rate since November 2022. Raw material prices remained elevated, despite dropping to a three-month low, amid reports of manufacturers passing on higher tariff-related costs. Additionally, tariffs continue to cause supply-side disruptions, as supplier delays have risen to the highest degree since October 2022 and are leading to growing vendor shortages. Small manufacturers and those in consumer-facing markets seem to be hit most severely by the impact of tariffs on prices and supply.

Nevertheless, manufacturers felt more optimistic that economic conditions will be more stable in a year’s time, particularly expecting tariff disruptions to dissipate in the months ahead. Therefore, confidence reached a three-month high to right above the survey average.

New orders for manufactured goods fell 3.7% in April following four consecutive monthly increases. When excluding transportation, new orders slipped 0.5%. Orders for durable goods dropped 6.3%, following a 7.6% increase in March. Year to date, durable goods orders are up 4.2%. Nondurable goods orders ticked down 0.9% in April after declining 0.7% in March. Nondurable goods orders are down 0.1% over the year.

New orders for nondefense aircraft and parts led the decrease in durable goods, falling 51.5%, after leaping 158.5% in March. In April, the largest monthly increase occurred in ships and boats, which rose 92.1%, after slipping 4.7% the month prior. The largest over-the-year changes also occurred in nondefense aircraft and parts (up 85.5%) and mining, oil field and gas field machinery (down 9.7%).

Factory shipments decreased 0.3% in April, after slipping 0.2% in March. Shipments over the year increased 0.9%. Shipments excluding transportation fell 0.6% in April, following a 0.3% decrease the previous month. Shipments for durable goods improved 0.3% in April, up from a 0.2% increase in March and up 1.8% year to date. Meanwhile, nondurable goods shipments declined 0.9% in April and are down 0.1% year to date.

Unfilled orders for all manufacturing industries stayed the same in April, following a 1.6% increase in March. Inventories edged down 0.1%, after rising 0.1% for the past four months, and the inventories-to-shipments ratio rose to 1.58 from 1.57. The unfilled orders-to-shipments ratio for durable goods decreased to 6.77 from 6.86 in March.