The New York Federal Reserve's Empire State Manufacturing Survey came in at a seasonally adjusted 0.62 for March on Tuesday, much higher than Bloomberg's consensus estimate of -11.25 and well above February's -16.64.

March's result is the first positive reading for the survey since July 2015, indicating that conditions are beginning to stabilize for manufacturers in New York state. Labor conditions remained largely the same, with employment and average workweek steady, while new orders and shipments rose well above zero for the first time in months. Input prices increased slightly, while selling prices decreased slightly, a trend which could squeeze manufacturers if it continues. Survey respondents' six-month outlook improved, rising to 25.52 from 14.48.

The Bottom Line

For months, U.S. economic data has been characterized by a divergence between a thriving services sector and struggling manufacturers. The sharp improvement in conditions for New York manufacturers is encouraging, suggesting that the larger services sector – representing 80% of GDP – will pull up manufacturing, rather than manufacturing dragging on services.

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