The Empire State Manufacturing Index fell sharply to -31.8 in May (consensus -1.8) from 10.8 in April.
The dividing line between expansion and contraction for this survey is 0.0.
The key takeaway from the survey is that the new orders index sank 53 points to -28.0, underscoring a sharp drop off in demand in May.
Treasury yields turned higher in response to the data.
The 2-yr note yield, at 3.95% shortly before the release, is up three basis points to 4.01%.
The 10-yr note yield, at 3.47% earlier, is up four basis points to 3.50%.