The general business conditions index in the New York Fed's Empire State survey of manufacturing is down to minus 11.9 in October after an increase to 11.5 in September. The October index is below the consensus of 2.7 in the Econoday survey of forecasters. The index has a tendency to swing between softer and firmer readings, so the 23.4 point drop from the prior month is not necessarily a sign of deterioration in conditions unless it is followed by further weak readings in the coming months. The two-month running average of the general business conditions index shows less volatility in the underlying trend at minus 0.20 in October after 3.40 in September.

The index for future business conditions is improved to 38.7 in October from 30.6 in September. It is the strongest since 52.0 in October 2021 when the economy was in high gear as the factory sector worked to fill backlogs in the supply chain. Conditions won't be similar six months from now, but overall modest growth should help the regional factory sector expand.

The general business conditions index is a diffusion index in response to a specific question, not calculated from components. As such, it reflects respondents' perceptions and does not necessarily line up with the detail indexes. However, in October, the drop in the new orders index to minus 10.2 after 9.4 in the prior month does much to explain the decline in the general business conditions index. The index for order backlogs is down to minus 2.2 in October after 2.1 in September. The shipments index is down to minus 2.7 after 17.9 in September. The index for delivery times softened further to minus 3.2 in October from minus -1.1 in September. There are no delays for material along the supply chain.

However, the index for employment is up to 4.1 in October after minus 5.7 in September and the first positive since 2.2 in October 2023. There is a hint that manufacturers are hiring where they can find qualified workers in anticipation of a pickup in activity in the near future. The index for the average workweek shows expansion for a second month in a row at 4.7 in October after 2.9 in September.

The prices paid index is up to 29.0 in October from 23.2 in September. The October reading is the highest since 33.7 in April. The increase is probably due to somewhat higher energy costs. The index for prices paid is up to 10.8 in October from 7.4 in the prior month and suggests that businesses are raising prices where they can.

After a surprising jump in manufacturing business activity in September, the index is expected to retreat but stay positive in October with the index at 2.7, down from 11.5 in September and compared with minus 4.7 in August.

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.