Current manufacturing production rebounds into expansion territory in March but broader manufacturing business conditions contract again in the Dallas Federal Reserve district.

The Dallas Fed's overall manufacturing business conditions index slips to minus 16.3 in March from minus 8.3 in February even as production improves to positive 6.0 from minus 9.1 in February. Shipments is at 6.1 versus 5.6.

Other barometers of current conditions show new orders at minus 0.1 in March versus minus 3.5 in February. Employment declines to minus 4.6 from minus 0.7. Hours worked are at minus 2.9 versus minus 14.2.

Interestingly, capex slips to minus 0.6 in March from 8.6 in February, essentially flat, as many manufacturers have put investment plans on hold pending clarity on the US tariff situation.

On the price front, prices paid for commodities rise to 37.7 from 35.0 as rising input costs remain a problem. Prices received are at 6.3 versus 7.8.

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.