The May general business conditions index in the New York Fed's Empire State survey of manufacturing is down slightly to minus 9.2 after minus 8.1 in April. This is below the consensus of minus 7.5 in the Econoday survey of forecasters. The April reading points to modest contraction in activity in the regional factory sector for the third month in a row. The index for future business conditions is in contraction for a second month at minus 2.0 in May from minus 7.4 in April. While less uncertain about the near future, the future index still shows concerns about a recession.

The index is a measure of business sentiment and as such does not always line up with the details. In May, the tone was slightly more positive for a number of the detail indexes, but not all.

The new orders index is up to 7.0 in May from minus 8.8 in April and unfilled orders picked up the pace a little at 4.8 in May after 4.1 in the prior month. This suggests that regional factories have new work and some orders in the pipeline. The shipments index is up to 3.5 in May from minus 2.9 in April as new orders are sent out quickly. The index for delivery times continues to hover around neutral at 1.0 in May from 0.0 in April and 1.0 in March. This points to economic conditions that are neither hot nor cold.

However, the employment index is slower at minus 5.1 in May from minus 2.6 in April and has remained a negative for four straight months. The workweek index continues to signal contraction at minus 3.4 in May, if less deep than minus 9.1 in April.

The inventory index remains a positive at 4.8 in May, although slower than 7.4 in April. The inventory index has been in expansion since November 2024 as businesses stock up during a period of uncertainty regarding supplies and prices.

Contributing to the worsening perceptions of conditions is the index for prices paid versus the index for prices received. The prices paid index is up to 59.0 in May from 50.8 in April, and at its highest level since 64.3 in July 2022. The prices received index is down to 22.9 in May from 28.7 in April. Regional manufacturers are having to pay more but are less able to pass on increased costs.

Not much change expected with index mired in contraction at minus 7.5 in May versus minus 8.1 in April.

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.