A report released Friday by the New York Fed indicated that service sector business leaders broadly reported pricing difficulties in October and held a pessimistic view of the business outlook.
In its latest edition of the Business Leaders Survey this month, the bank said: "The pace of input price increases remains rapid, and the pace of selling price gains accelerated to the fastest since 2022." The report added that "supply availability continued to deteriorate."
These price pressures facing business leaders come as the report found the business climate "far worse than normal," with firms growing increasingly pessimistic about the outlook.
The report said current business activity is also weakening, with the headline index falling 12 points to negative 20.7, the weakest reading since March.
The pessimism captured by the New York Fed survey contrasts with other data showing strong economic activity, a steady low unemployment rate, and robust investment in the technology sector.
Nevertheless, the gloomy inflation findings in the survey align with a range of statistics indicating that price pressures remain strong under the ongoing impact of President Trump's trade tariffs and the U.S.-Israel war in the Middle East, with energy costs surging.
High inflation prompted the Federal Reserve to raise rates last month, and another hike is likely before the end of the year.
However, Fed Chair Kevin Warsh offered no guidance in remarks Thursday evening, saying: "I will not prejudge the meeting... I do not think I should announce now what actions I might take at the remaining meetings this year."
Chicago Fed President Austan Goolsbee said in a Yahoo Finance interview on Wednesday that the consumer-level inflation report released Wednesday was "disappointing," noting that "if you break down the components, there is little sign of improvement in services inflation."
Goolsbee said: "We need to pay close attention" to this part of the price pressure landscape, "because it is not really coming from supply shocks."
The severe price pressures pointed to by the New York Fed survey come as a government report showed import prices surged in September, with costs that month rising at a pace of 1.1%, far exceeding expectations.
The Business Leaders Survey also noted "weak" capital spending plans while highlighting that "supply availability is expected to continue deteriorating."
The weakening of the October Business Leaders Survey, combined with the bank's other regional data, indicates uneven economic conditions in the New York region.
The bank's October Empire State Manufacturing Survey released Thursday showed the headline business conditions index rising to a five-year high, but it also faced "elevated" input and selling prices as well as supply chain-related challenges.
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