The general business conditions index in the New York Fed's Empire State survey of manufacturing is little changed at minus 6.6 in July after minus 6.0 in June. The July reading is close to the consensus of minus 6.0 in the Econoday survey of forecasters. The index can be subject to wild swings month-to-month, but the past five months point to relatively stable conditions that are improving slowly, if a bit unevenly. The current conditions index has remained consistent with contraction since December 2023. Any upward momentum is for less contraction, not signaling a return to expansion just yet. The future business conditions index about six months from now softened to 25.8 in July after 30.1 in June, although that was well above 14.5 in May. The outlook for the near term is mildly more optimistic than it was.

The detail indexes point to broad-based subdued activity in July. The index for new orders is up slightly and close to neutral at minus 0.6 in July after minus 1.0 in June and is the least negative since positive 10.0 in November 2023. Unfilled orders fell to minus 11.2 in July after briefly turning positive at 1.0 in June when it was the only non-negative reading since 0.0 in April 2023.

The shipments index is up slightly to 3.9 in July after 3.3 in June and is the first back-to-back positive reading since November-December 2022. The delivery times index is down to minus 9.2 in July after minus 4.1 in June as there are few delays along the supply chain. The inventories index is down to minus 6.1 after three months slightly above neutral and points to a modest correction to avoid a buildup in goods on hand.

The employment index has exhibited only minor month-to-month changes recently. In July, the index is at minus 7.9 after minus 8.7 in June. There has been no substantial change since March while hiring remains subdued in the factory sector. The average workweek index is up to minus 0.1 in July after minus 9.9 in the prior month. The workweek appears to be stabilizing after shrinking for nine months.

The index for prices paid is up a bit to 26.5 in July after 24.5 in June with a modest increase in energy costs probably behind the rise. The index for prices received shows that manufacturers have less power to pass through higher costs with the index at 6.1 in July after 7.1 in June, which was down from 14.1 in May.

The Empire State index is expected to extend its long contraction in July, matching June's minus 6.0 which compared with expectations for minus 10.5. New orders improved in June but were in slight contraction.

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.