Businesses in the New York-Northern New Jersey region faced increasing cost pressures in 2025, following a period of moderation. While tariffs contributed to rising input costs—particularly for manufacturers—they were not the sole driver. Firms reported substantial increases across numerous categories over the past year, according to new data collected through regional business surveys.
Sharpest Increases
The most significant cost increases were in employee health insurance and utilities. Business insurance and the costs of goods and materials also rose substantially. Firms anticipate that cost growth will slow somewhat in 2026, but remain significant.
Cost increases accelerated notably in 2025 compared to the previous two years, especially for manufacturers. In 2024, average cost increases were around 5 percent for both service firms and manufacturers. However, in 2025, costs rose by 7 percent for service firms and 8.5 percent for manufacturers. These increases exceeded earlier expectations; service firms had predicted a 6 percent increase, while manufacturers anticipated a 7 percent rise.
Insurance and Utilities Lead the Way
The largest cost increases over the past year were for employee health insurance and utilities. Health insurance costs rose 14.2 percent on average for manufacturers and 12.9 percent for service firms. Some firms reported increases between 25 percent and 50 percent upon renewal. Goods and materials costs increased by 8 percent for manufacturers and 5.5 percent for service firms. The greater exposure of manufacturers to tariffs may have contributed to the larger increase in goods and materials costs, with firms citing increases in the costs of aluminum, steel, equipment, and other tariffed products.
Looking ahead, cost increases are expected to moderate to 5.4 percent for service firms and 4.8 percent for manufacturers in 2026. This represents a decline from 2025 and a return to levels similar to those reported in 2024. Further analysis will examine the impact of rising health insurance costs on wage growth and firms’ pricing behavior and inflation expectations.
Frequently Asked Questions
What categories saw the largest cost increases?
Firms reported the sharpest cost increases over the past year were for employee health insurance and utilities, followed by business insurance, and goods and materials inputs.
Did tariffs play a role in rising costs?
Tariffs played a role in driving up the costs of many inputs, especially among manufacturers, but represented only part of the story.
What do firms expect for cost increases in 2026?
Firms expect cost growth to moderate in 2026, with increases slowing to 5.4 percent for service firms and 4.8 percent for manufacturers.
How will businesses adapt to these ongoing cost pressures in the coming months?
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