We got an early look at manufacturing activity this month, courtesy of the New York Federal Reserve Bank’s Empire State manufacturing index.

It surveys manufacturers in New York state about demand, input costs, employment and other measures of business activity. And in March, the index fell to its lowest level in more than a year.

Demand is lower, inventories are piling up on manufacturers’ shelves and employment levels are cooling off, according to the index. But prices on both inputs and finished products are up.

“Both of those measures rose to their highest level in a couple of years,” said Tim Quinlan, senior economist with Wells Fargo.

He called this the latest indication that tariffs are already causing friction.

“You saw it with last week’s consumer sentiment measures, you saw it with retail sales numbers, and you’re certainly seeing some softness in this gauge from the New York Fed,” said Quinlan. 

New York’s manufacturing sector includes a lot of industries that are vulnerable to tariffs.

“There are firms that, for example, are producing parts for wind energy, for solar energy. We’ve seen growth in a lot of that. But there are also a lot of staples. So we do still have auto and steel industries present in New York state,” said Russell Weaver, research director with Cornell’s School of Industrial and Labor Relations.

One factor in particular might have weighed on the index. Earlier in the month, when the New York Fed conducted the survey, Canada had threatened to slap a surcharge on energy exports to New York and two other states in response to the Donald Trump administration’s tariffs.

Richard Vogel, dean of the business school at Farmingdale State College, said that even though Canada ultimately held off, “just the possibility of it starts to weigh in on people’s thought processes and their planning.”

The Empire State manufacturing index also tends to be volatile month to month. But Kathy Bostjancic, chief economist at Nationwide, said the index can give us an early glimpse of what’s happening to manufacturing across the country.

“I went back just the last 10 years to see what’s the correlation, and it does suggest that when we see some changes happening in the New York area, that tends to be reflective also at the national level,” she said. 

Right now, Bostjancic said, the Empire State manufacturing index is pointing to a slowdown.