The Dallas Fed's manufacturing survey moved further into expansion in January after recording growth in December for the first time since April 2022. The Dallas Fed's general activity index came in at 14.1 in January versus a revised 4.5 in December (previously reported at 3.4 in December).

Production came in at 12.2 in January versus a revised 5.3 in December (previously 3.9). New orders improved to 7.7 in January from 1.5 in December (previously minus 0.9), which suggests more growth ahead.

Employment was at 2.2 in January versus 0.4 in December (previously 0.3). Capex, interestingly, perked up to 13.0 in January versus 10.9 in December (previously 11.2).

Prices paid for raw materials registered 17.5 in January versus 12.1 in December (10.5 ). Pricing power improved with prices received 6.2 in January versus minus 2.6 in December (minus 3.4).

On the six-month outlook, general business conditions registered 35.5 in January versus an unrevised 20.6 in December.

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.