The general business conditions index in the New York Fed's Empire State manufacturing survey has another wild swing to a positive 6.6 in June after plunging to minus 31.8 in May. The reading is well above the consensus of minus 15.1 in the Econoday survey of forecasters. The index has been see-sawing between stronger and softer months making it difficult to discern an underlying trend for current conditions in the region. However, the future conditions index has been rising steadily for the past four months. In June it rose sharply to 18.9 after 9.8 in May and is the highest since 36.6 in March 2022. At least for the New York Fed region, it looks like a factory sector recession may be avoided.

Much of the improvement in the headline diffusion index can be attributed to a rebound in new orders. The new orders index rose to a positive 3.1 in June from minus 28.0 in May. The orders backlog index remains in contraction at minus 8.0 after minus 13.2 in the prior month. With few orders in the pipeline, the index for shipments rose to a swift 22.0 in June after minus 16.4 in May. The index for delivery times was near neutral at minus 1.0 in June from minus 5.7 in the prior month. The index for inventories contracted less at minus 6.0 in June from minus 12.3 in May. The index for employment remained in contraction for a fifth month in a row at minus 3.6 in June after minus 3.3 in May.

The prices paid index slowed to 22.0 in June from 34.9 in May and was probably due to moderation in commodities prices. The pace of prices received eased to 9.0 in June from 23.6 in May and indicates that manufacturers are less able to pass through higher costs. However, it may also show that there is less need to raise prices.

Following May's wild downswing to minus 31.8 from April's plus 10.8, June's Empire State index is expected to roughly split the difference, at minus 15.1.

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.