Manufacturers in New York saw costs climb at the fastest pace in nearly two years, according to a Federal Reserve Bank of New York survey, a troubling sign that high inflation remains embedded in the economy.
The Empire State Manufacturing Survey for February showed a sharp increase in both prices paid and prices received by producers, indicating rising costs for raw materials and goods. The index for prices paid jumped 11 points to 40.2, its highest level since early 2022. The index for prices received, a measure of what businesses are charging for their goods, also rose for a second consecutive month.
The report follows a hotter-than-expected consumer price index (CPI) reading for January and adds to growing concerns that inflation is not cooling as quickly as the Biden administration and Fed officials had expected. Federal Reserve officials have signaled that they need clearer evidence of declining inflation before considering interest rate cuts, and this manufacturing data suggests that cost pressures are still rippling through the supply chain.
Biden’s massive deficit spending and regulatory overreach have kept costs elevated even as the Fed has tried to rein them in with aggressive rate hikes. While Wall Street had been betting on rate cuts as early as March, the persistence of inflationary pressures makes it increasingly unlikely that the Fed will ease policy anytime soon.
Despite rising input costs, overall business conditions improved, with the survey’s general business index climbing 18 points to 5.7. However, expectations for future conditions deteriorated, with manufacturers reporting a sharp drop in optimism about the months ahead.
The New York Fed’s survey, conducted between February 3-11, provides an early look at manufacturing conditions before national economic data is released. The sharp rise in costs reported by manufacturers suggests that Bidenflation remains a persistent drag on the economy, squeezing businesses and keeping consumers under pressure.
As inflation refuses to fade, the question now is whether the Federal Reserve will be forced to hold rates higher for longer—a scenario that could further slow economic growth and strain the labor market.
President Trump’s tariff policies and efforts to reduce regulatory burdens and government spending could boost the factory sector in the months ahead.
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