The general business conditions index in the New York Fed's Empire State survey of manufacturing is slightly higher at minus 4.7 in August after minus 6.6 in July. The reading in August is above the consensus of minus 6.0 in the Econoday survey of forecasters. The index has been relatively steady in the last three months and working its way unevenly upward from the recent low of minus 43.7 in January. The future business conditions index is down somewhat to 22.9 in August after 25.8 in July. Businesses in the regional factory sector anticipate modest expansion about six months from now.

While most of the detail indexes are consistent with soft conditions, those for prices may account for the less gloomy perceptions of business conditions. The index for prices paid in August is down to 23.4 after 26.5 in July. The index for prices received is up to 8.5 in August after 6.1 in July. Lower input costs and better pricing power are positive developments for manufacturers.

The index for new orders is down to minus 7.9 in August from minus 0.6 in July and the backlogs index is up to minus 7.4 after minus 11.2 in the prior month. Incoming orders remain weak with little in the pipeline. The shipments index falls to 0.3 in August after 3.9 in July as orders are moving out quickly. The employment index is a bit higher at minus 6.7 in August after minus 7.9 in July but remains in negative territory for the 10th month in a row. The index for the average workweek falls sharply to minus 17.8 in August from -0.1 in July.

The index for delivery times is higher at minus 3.2 in August after minus 9.2 in July and points to materials moving at a less fast pace through the supply chain. The supply availability index is down to minus 2.1 in August from 0.0 in July. The inventories index shows inventories shrinking at minus 10.6 in August after minus 6.1 in the prior month with little sign of unwanted stocks piling up.

The Empire State index is expected to extend its long contraction in August, at a consensus minus 6.0 following July's minus 6.6. New orders in July were flat at minus 0.6.

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.