New York's services sector outlook is deteriorating: New York services firms’ expectations about business activity over the next 6 months dropped to 28.1 points in May, the lowest since 2020. Excluding 2020, this is the lowest since 2008, according to the NY Fed. Since the beginning of 2025, expectations have declined by over 50.0 points. At the same time, business climate outlook over the next 6 months fell ~60.0 points, to -45.9, the second-lowest since 2008. Meanwhile, the prices paid index hit 58.5 points, the highest in 2 years. Stagflation remains the base case.