| Survey | Current | MoM | Future | Regime |
|---|---|---|---|---|
| Empire State (NY) | +11.0 | +11.2 | +19.6 | Strong Expansion |
| Philadelphia Fed | +26.7 | +8.6 | +40.8 | Strong Expansion |
| Dallas Fed | -0.2 | -0.4 | — | Contraction |
Note: Readings above 0 indicate expansion, below 0 indicate contraction.
The March data reveals a significant divergence in regional performance, anchored by a strong Regional Fed Composite reading of 12.5. The Philadelphia Fed led the charge with a robust 26.7 reading, while the Empire State survey followed with a solid 11.0. Both of these East Coast indicators are currently in a strong expansion regime, signaling a surge in industrial demand. Conversely, the Dallas Fed showed a slight contraction at -0.2, highlighting a regional drag likely tied to energy or specific local factors. Despite the Texas weakness, the overall environment is characterized by two out of three major surveys expanding. This setup suggests that the core of the U.S. manufacturing base is gaining substantial momentum as we move through the first half of 2026.
| Component | Current | Future |
|---|---|---|
| New Orders | +19.3 | +24.8 |
| Shipments | +20.2 | — |
| Employment | +9.8 | +18.1 |
| Prices Paid | +51.0 | — |
| Prices Received | +21.8 | — |
| Component | Current | Future |
|---|---|---|
| New Orders | +33.0 | +45.7 |
| Shipments | +34.0 | — |
| Employment | -5.1 | +35.9 |
| Prices Paid | +59.3 | — |
| Prices Received | +33.5 | — |
| Component | Current |
|---|---|
| New Orders | -6.4 |
| Shipments | -10.6 |
| Employment | -1.1 |
| Prices Paid (Raw Materials) | +36.0 |
| Prices Received | +8.2 |
| Capacity Utilization | -4.5 |
| Capital Expenditures | +8.1 |
| Metric | Value |
|---|---|
| Trend Direction | Improving |
| Expansion Streak | 1 months |
| Expansion Months (12M) | 7 of 12 |
| Contraction Months (12M) | 6 of 12 |
| 12-Month Percentile | 92% |
The manufacturing sector has officially entered a strong expansion regime with the composite index hitting its highest levels in recent months. This marks the first month of a new expansionary streak, but the underlying trend is clearly improving with a 12-month percentile ranking of 92%. While the Dallas Fed's current activity remains slightly negative, its future activity reading of 10.8 suggests that even the laggards expect a turnaround. The surge in new orders in New York at 19.3 and Philadelphia at 33.0 provides a high-conviction signal that this expansion has legs. Prices paid remain elevated, particularly in Philadelphia at 59.3, indicating that while activity is booming, input costs are still a factor to watch. Overall, the regime shift from stabilization to strong expansion is a bullish development for the broader economy.
| Index | Value | MoM | Interpretation |
|---|---|---|---|
| National Activity Index | -0.20 | -0.23 | Trend Growth |
| 3-Month Moving Avg | -0.03 | — | Smoothed Trend |
| Diffusion Index | -0.04 | — | Breadth of Expansion |
| Midwest Economy | +0.69 | — | Regional Activity |
CFNAI: 85 indicators of national economic activity. Zero = historical trend growth.
| Index | Value | MoM | Conditions |
|---|---|---|---|
| NFCI (Chicago) | -0.50 | -0.02 | Slightly Loose |
| STLFSI (St. Louis) | -0.76 | -0.11 | Normal |
| KCFSI (Kansas City) | -0.71 | +0.03 | Normal |
Financial stress indexes: Zero = average conditions. Positive = tighter/more stress.
Found 20 historical periods with Empire State readings near +11.0
On average, 3 months later: +3.9 | 6 months later: +11.0
| Date | Reading | +3 Months | +6 Months |
|---|---|---|---|
| Jun 2023 | +6.1 | -5.3 | -13.6 |
| Jan 2022 | +10.9 | +20.3 | +2.1 |
| Feb 2021 | +9.5 | +31.9 | +20.7 |
| Jan 2021 | +14.0 | +22.6 | +35.8 |
| Oct 2020 | +9.0 | +14.0 | +22.6 |
Analysis of 20 historical periods with similar data profiles suggests a positive, albeit moderating, path forward for industrial activity. Historically, after hitting these levels, the average reading three months later tends to settle at 3.9, indicating a potential cooling from the current strong pace. However, the six-month outlook remains bright, with an average historical reading of 11.0, suggesting a sustained expansionary cycle. Investors should watch for whether the current surge in new orders translates into sustained employment growth, which was a key differentiator in past cycles. These parallels indicate that while the initial pop in activity is intense, the long-term trend usually stabilizes into a healthy growth phase. Monitoring the CFNAI 3-month moving average, currently at -0.03, will be crucial to see if regional strength translates to national trend growth.
| ETF | Price | 1M | 6M | 1Y | YTD |
|---|---|---|---|---|---|
| XLI Industrials | $171.04 | +4.9% | +11.8% | +41.1% | +10.3% |
| XLB Materials | $51.83 | +9.0% | +17.2% | +32.3% | +14.3% |
| XLE Energy | $56.54 | -5.2% | +31.2% | +46.1% | +26.5% |
| Stock | Price | 1M | 6M | 1Y | YTD |
|---|---|---|---|---|---|
| CMI Cummins | $639.22 | +16.6% | +54.4% | +135.6% | +25.2% |
| CAT Caterpillar | $808.87 | +15.3% | +52.3% | +185.9% | +41.2% |
| ETN Eaton Corp | $413.87 | +15.0% | +9.9% | +61.0% | +29.9% |
| ROK Rockwell Automation | $407.02 | +13.7% | +15.4% | +80.8% | +4.6% |
| EMR Emerson Electric | $142.77 | +10.0% | +9.5% | +49.3% | +7.6% |
| URI United Rentals | $802.79 | +9.7% | -19.7% | +41.3% | -0.8% |
| PCAR PACCAR | $125.27 | +9.6% | +28.5% | +44.5% | +14.4% |
| PH Parker-Hannifin | $954.43 | +5.3% | +29.3% | +75.7% | +8.6% |
| DE Deere & Company | $579.99 | +1.9% | +25.4% | +32.2% | +24.6% |
| ITW Illinois Tool Works | $267.09 | +1.7% | +5.8% | +18.8% | +8.4% |
| HON Honeywell | $219.97 | -1.4% | +13.3% | +14.4% | +12.8% |
| GE GE Aerospace | $276.29 | -5.2% | -8.7% | +55.3% | -10.3% |
The strong expansion in the Northeast and Mid-Atlantic regions bodes well for diversified industrials and heavy equipment manufacturers. Companies like Caterpillar (CAT) and Deere & Co (DE) often see increased demand when regional new orders indices spike as they have this month. Honeywell (HON) and Emerson Electric (EMR) are also likely to benefit from the improving capital expenditure environment signaled by the Philadelphia Fed's data. For those looking at the energy-adjacent manufacturing sector, the Dallas Fed's weakness suggests a more cautious approach to companies like National Oilwell Varco (NOV). Investors can gain broad exposure to this regional strength through the Industrial Select Sector SPDR Fund (XLI) or the Materials Select Sector SPDR Fund (XLB). The high prices paid readings suggest that companies with strong pricing power, such as 3M (MMM), will be better positioned to protect margins.
Based on the 92nd percentile regime reading and strong new orders, investors should consider an overweight position in cyclical industrials and materials. The loose financial conditions, evidenced by the NFCI at -0.50 and St. Louis FSI at -0.76, provide a supportive backdrop for capital-intensive businesses. While the Dallas Fed's contraction is a note of caution, the future activity index there suggests the weakness is temporary rather than systemic. We recommend focusing on high-quality cyclicals that can navigate the elevated input costs seen in the prices paid components. A shift in strategy would be warranted if the CFNAI Diffusion Index drops significantly further or if new orders begin to contract across multiple regions. For now, the improving trend supports a pro-growth stance within the industrial complex as the expansion takes hold.