The Empire State report shows manufacturing contracts unexpectedly and significantly with the Empire current business conditions index dropping to minus 20 in March from 5.7 in February, and well below the expected 0.2. Price indexes rise, suggesting an unfortunate mix of increasing price pressures and slowing business activity.

New orders, shipments, unfilled orders, and employment all decline and are in negative territory, indicating contraction. A very disappointing early read on business in March. New orders is down to minus 14.9 in March from 11.4 in February, a harbinger of more weakness ahead. Shipments is down to minus 8.5 from 14.2, unfilled orders down to minus 2.0 from 1.1. Employment is down to minus 4.1 from minus 3.6.

Prices paid rise to 44.9 in March from 40.2 in February to reach its highest in more than two years. Prices received are up to 22.4, highest since May 2023, from 19.6 in February.

The index is expected to fade to an uninspiring 0.2 in March from 5.7 in February and minus 12.6 in January.

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.