The general business conditions index for October in the New York Fed's Empire State survey of manufacturing returns to negative territory at minus 4.6 after modest expansion at 1.9 in September. The October reading is close to the consensus of minus 5.0 in the Econoday survey of forecasters. The decline in current business sentiment for the regions likely reflects the weakness in new orders, but there are a few bright spots in the report. The future business conditions index is down in October but remains solidly positive at 23.1 after rising to 26.3 in September.

In the report details, the index for new orders is minus 4.2 in October after a jump to 5.1 in September. Order backlogs index contracts more sharply at minus 19.1 in October after minus 5.2 in September. There are fewer unfilled orders to support the dips in new orders. The shipments index shows bare expansion at 1.4 in October after 12.4 in September. The index for delivery times points to sluggish activity at minus 6.4 in October after 2.1 in the prior month. The inventory index continues to contract at minus 2.1 in October from minus 6.2 in September.

Nonetheless, the index for employment is at 3.1 in October after two months of contraction. Manufacturers may be hiring if they find workers with the right skills. The average workweek index rose to 2.2 in October following two months of contraction.

The index for prices paid is essentially unchanged at 25.5 in October after 25.8 in September. On net, input costs increases have been fairly steady and mild for the past five months. The prices received index is down to 11.7 in October after 19.6 in September. Businesses are able to pass through some costs, but less so than earlier in 2023.

October's Empire State index is expected to fall into modest contraction, to minus 5.0 after September's plus 1.9 which was the third positive score in four months.

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.