The general business conditions index for March in the New York Fed's Empire State Survey is down sharply to minus 24.6 after minus 5.8 in February. The index is well below the consensus of minus 7.7 in an Econoday survey. The index has remained in contractionary territory for the past four months. The index for future business conditions is lower at 2.9 in March, falling from 14.7 in February.

Although the conditions index is not calculated from components, the details of the report show a wide weakening in activity in March. Notable is a drop in the new orders index to minus 21.7 in March from minus 7.8 in February. The shipments index turned negative at minus 13.4 in March after 0.1 in February. The employment index contracts for a second month in a row at minus 10.1 in March after minus 6.6 in the prior month. The average workweek index continues to show slowness at minus 18.5 after minus 12.1 in the prior month. The delivery times index shows little delay in the pipeline at minus 7.6 in March after minus 9.2 in February.

If there is a bright spot in the data, it's that the prices paid index moderated to 41.9 in March after rising to 45.0 in February. Some of this is likely due to lower energy costs. Manufacturers continue to increase prices, although at a slower pace. The prices received index is at 22.9 in March after 28.4 in February.

The Empire State index in March is expected to fall to minus 7.7 after February's strong recovery but still negative reading of minus 5.8.

The New York Fed conducts this monthly survey of manufacturers in New York State. Participants from across the state represent a variety of industries. On the first of each month, the same pool of roughly 200 manufacturing executives (usually the CEO or the president) is sent a questionnaire to report the change in an assortment of indicators from the previous month. Respondents also give their views about the likely direction of these same indicators six months ahead.

Investors track economic data like the Empire State Manufacturing Survey to understand the economic backdrop for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers a moderate growth environment that won't generate inflationary pressures. The Empire Manufacturing Survey gives a detailed look at New York state's manufacturing sector, how busy it is and where things are headed. Since manufacturing is a major sector of the economy, this report has a big influence on the markets. Some of the Empire State Survey sub-indexes also provide insight on commodity prices and other clues on inflation. The Federal Reserve closely watches this report because when inflation signals are flashing, policymakers can reset the direction of interest rates. As a consequence, the bond market can be highly sensitive to this report. The equity market is also sensitive to this report because it is the first clue on the nation's manufacturing sector, reported in advance of the Philadelphia Fed's business outlook survey.