May 2026 Report

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Manufacturing activity in the region weakened overall, according to the firms responding to the May Manufacturing Business Outlook Survey. The survey’s indicators for general activity, new orders, and shipments all fell sharply this month. The employment index ticked up but remained negative, continuing to suggest overall declines in employment. Both price indexes declined this month but remained elevated. The firms continue to expect overall growth over the next six months, and most future indicators rose this month from already elevated readings.

Most Current Indicators Decline

The diffusion index for current general activity fell from 26.7 in April to -0.4 in May after rising in each of the previous four months (see Chart 1). Equal shares of firms (almost 23 percent) reported increases in activity (down from 33 percent last month) and decreases (up from 6 percent); 55 percent of the firms reported no change in activity (down from 62 percent). The current shipments and new orders indexes also dropped sharply in May, with the latter falling into negative territory. The shipments index declined 29 points to 4.9, and the new orders index fell 35 points to -1.7, its lowest reading since April 2025. Over 30 percent of the firms reported decreases in new orders (up from 8 percent last month), 28 percent reported increases (down from 41 percent), and 42 percent reported no change (down from 49 percent).

The employment index rose 2 points to -2.8 in May, its third negative reading in four months. Most of the firms (73 percent) reported no change in employment levels this month, but the share reporting decreases (15 percent) exceeded the share reporting increases (12 percent). The average workweek index declined from 7.7 to 1.2.

Price Indexes Remain Elevated but Decline

Both price indexes declined this month but remained above their long-run nonrecession averages. The prices paid index fell 11 points to 47.9 in May (see Chart 2). Nearly 48 percent of the firms reported increases in input prices (down from 61 percent last month), while none reported decreases (down from 2 percent); 52 percent reported no change (up from 37 percent). The current prices received index declined 7 points to 26.3. More than 26 percent of the firms reported increases in the prices of their own goods, none reported decreases, and 74 percent reported no change.

Larger Share of Firms Expects Near-Term Changes to Industry Costs

In this month’s special questions, the firms were asked about changes in core customer price sensitivity and anticipated cost changes. Over 42 percent of the firms reported that customers have become more price sensitive since last quarter, while 54 percent reported customers’ sensitivity was about the same. Forty-eight percent of the firms indicated they anticipate changes in their industry’s costs in the near term (up from 39 percent last quarter), and 75 percent of those firms expect their competitors to raise prices in response. Regarding when these price changes will occur, the firms’ median expectation was for competitors to change prices in the next three months.

Most Future Indicators Strengthen Further

The diffusion index for future general activity rose 12 points to 53.2 this month, its highest reading since June 2021 (see Chart 1). Almost 67 percent of the firms expect an increase in activity over the next six months (up from 57 percent last month), exceeding the 13 percent that expect a decrease (down from 16 percent); 18 percent expect no change (down from 25 percent). The future new orders index increased 8 points to 53.5, and the future shipments index rose 5 points to 45.7. The firms continue to expect increases in employment over the next six months, but the future employment index moved down 4 points to 31.7. Both future price indexes moved higher above their long-run averages. The future prices paid index jumped 20 points from 50.2 to 70.0, its highest reading since November. The future prices received index moved up from 50.2 to 60.5. The index for future capital expenditures declined 4 points to 30.9.

Summary

Responses to the May Manufacturing Business Outlook Survey suggest an overall weakening in the region’s manufacturing activity. The indicators for current activity, new orders, and shipments all fell sharply this month. The firms continued to report an overall decline in employment, on balance. Price increases were less widespread this month, but both price indexes remained elevated. The survey’s broad indicators for future activity moved higher and continued to suggest expectations for growth over the next six months.