The Dallas Fed's manufacturing survey shows a ray of sunshine as it recovers into expansion territory in December for its first growth since April 2022. The Dallas Fed's general activity index is at 3.4 in December versus minus 2.7 in November and minus 3.0 in October.

Production moves above the neutral level to 3.9 in December from -0.9 in November. New orders improve to minus 0.9 in December from minus 11.9, indicating new orders are essentially flat from November. Employment remains marginally positive at 0.3 versus 4.9 in November. Capex, interestingly, perks up to 11.2 in December from 7.8 in November.

Price pressures diminish in December as prices paid for raw materials register 10.5 in December versus 28.5 in November and 16.3 in October. Pricing power suffers with prices received at minus 3.4 in December versus 8.8 in November, and 7.4 in October.

On the six-month outlook, general business conditions registers 20.6 in December versus 31.2 in November and 29.6 in October.

The Dallas Fed Manufacturing Survey tracks factory activity in Texas on a monthly basis. Firms are asked whether output, employment, orders, prices and other indicators increased, decreased or remained unchanged over the previous month. Responses are aggregated into balance indexes where positive values generally indicate growth while negative values generally indicate contraction. About 100 manufacturers regularly participate in the survey.

Investors track economic data like the Dallas Fed 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 will not generate inflationary pressures. The Dallas Survey gives a detailed look at Texas' manufacturing sector, how busy it is and where it is headed. Since manufacturing is a major sector of the economy, this report can have a big influence on the markets. Some of the survey indexes also provide insight on inflation pressures -- including prices paid, prices received, wages & benefits, and capacity utilization. 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 an early clue on the nation's manufacturing sector, reported in advance of the ISM manufacturing index and often in advance of the NAPM-Chicago index.