New York-Area Service Firms Report Sharper Slowdown as Price Pressures Persist

# New York-Area Service Firms Report Sharper Slowdown as Price Pressures Persist

Business activity weakened sharply across the New York region’s service sector in October, while price increases remained widespread and firms grew more cautious about the months ahead.

The Federal Reserve Bank of New York’s October 2026 Business Leaders Survey paints an uncomfortable picture: declining activity, weak investment and persistent cost pressures, even as employment held steady.

The survey covers service firms in New York, northern New Jersey and southwestern Connecticut. Responses were collected October 2–9.

## Business activity falls to its weakest reading since March

The headline business activity index dropped 12 points to **-20.7**, its lowest level since March. About 42% of respondents reported declining activity, compared with roughly 22% reporting improvement.

The business climate index remained deeply negative at **-35.0**, with just over half of respondents describing conditions as worse than normal.

These are diffusion indexes, measuring the balance between firms reporting improvement and deterioration. The negative activity reading does not mean output fell 20.7%; it means substantially more businesses reported declines than increases.

## Prices remain a pressure point

Weaker activity brought little relief on costs. The prices paid index edged up to **70.0**, with approximately 71% of firms reporting higher input prices and fewer than 1% reporting decreases.

Meanwhile, the prices received index rose to **36.3**, its highest reading in four years. Nearly 40% of respondents raised their selling prices, while about 3% lowered them.

Together, these findings suggest that price pressures remain broad across the surveyed businesses despite the slowdown. The indexes describe how widespread price changes are, rather than the percentage increase in prices.

## Employment steadies, but investment remains weak

Employment provided a relatively stable note. The employment index improved to **zero**, with equal shares of firms reporting increases and decreases in staffing.

Wages continued to rise, although the survey characterized their growth as modest. Capital spending weakened further, with its index slipping to **-4.2**. Supply availability also continued to deteriorate, though less broadly than in September.

## The outlook turns pessimistic

Businesses became less optimistic about the next six months. The future business activity index fell from **5.0 to -5.1**, turning negative for the first time since December 2025.

Expected capital spending also moved into negative territory. Firms nevertheless anticipated modest employment growth and continued increases in input costs and selling prices.

October’s results suggest a regional service sector facing a difficult combination of softer activity and stubborn price pressures. Stable employment offers some reassurance, but weaker investment plans and fading confidence point to continued caution. This is a regional survey, however, and should not be treated as a measure of the entire U.S. service economy.