The general business conditions index in the New York Fed's Empire State survey of manufacturing is up to minus 6.0 in June after minus 15.6 in May, and the highest since minus 2.4 in February. The June reading is a bit above the consensus of minus 10.5 in the Econoday survey of forecasters. The general business conditions index has not had a positive reading since 9.1 in November 2023. However, the recent underlying trend suggests an uneven path toward improved conditions. Moreover, the index for future business conditions jumps to 30.1 in June after 14.5 in May and is the highest since 36.6 in March 2022. It points to greater optimism about activity in the near term.

The index is a diffusion index and not calculated from components. As such, it represents changes in respondents' sentiment about general business conditions. The detail indexes may tell a somewhat different story from the headline. In June, the details present a mixed picture of conditions that on balance are less negative than recent months. The important index for new orders is still in contraction at minus 1.0 in June, but far less so than the minus 16.5 in May and the firmest reading since 5.1 in September 2023. It is a hopeful sign that nine straight months of declines in orders are coming to an end. The unfilled orders index is up to 1.0 in June after minus 8.1 in May and the first positive since 2.6 in May 2022. Although a narrow positive, June unfilled orders suggest that some work in the pipeline is developing, a good sign for expansion in the region's factory sector.

The shipments index is up to 3.3 in June after minus 1.2 in May, indicating that products are moving out at an expansionary pace. The delivery time index is up to minus 4.1 in June after minus 9.1 in May, suggesting that movement along the supply chain is less swift and getting back toward a healthy neutral reading. The inventories index points to conditions around neutral at 1.0 in June after 2.0 in May, with inventories neither too large nor too small.

The index for employment remains soft at minus 8.7 in June after minus 6.4 in May. The pace of hiring has not changed much in the past four months as regional factories see slow conditions. The average workweek index shows continued contraction at minus 9.9 in June after minus 5.8 in May.

The prices paid index is lower at 24.5 in June from 28.3 in May, probably due to lower energy costs, but a welcome sign that broader disinflation could be occurring. The index for prices received points to weaker power to pass through higher costs at 7.1 in June after 14.1 in May, and the lowest since 3.9 in July 2023.

The Empire State index, at a consensus of minus 10.5, is expected to extend its long contraction in June following May's minus 15.6.

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.