NEW YORK (CNN/Money) - Manufacturing activity in New York state surged again in November, the New York Federal Reserve said Monday, defying Wall Street expectations for a decline.
The "general business conditions" index of the New York Fed's Empire State Manufacturing Survey of about 100 regional manufacturers rose to a 41, a new record, from a revised 34.1 in October. Economists, on average, expected the index to fall to 27, according to Briefing.com.
"Respondents continued to be highly optimistic about future conditions, with [future] indexes generally solidly positive and near the high readings of recent months," the New York Fed said in its report.
U.S. stock market futures had little reaction to the report, continuing to point to a negative opening on Wall Street. Treasury bond prices rose.
Wall Street had a similar reaction when the index also set a record in October; the survey has been in existence only since July 2001, covers only one state, and has often been volatile.
The index posted a similar dramatic jump in June, surging to 27.6 from 10.6 in May, but that surge was not fully reflected in national manufacturing data -- the national purchasing manager's index of the Institute for Supply Management rose to just 49.8 in June from 49.4 in May.
Nevertheless, there were encouraging signs in Monday's report. The index measuring expectations for business conditions six months from now rose to 67 from 65.68 in October. The New York Fed said 72 percent of respondents expected better conditions in the future, compared with just 5 percent expecting conditions to worsen.
The "number of employees" index was positive for the second month in a row, though it dipped to 10.26 from 11.54 in October. The "average employee workweek" index rose to 12.39 from 11.68.
The new orders index rose to 41.37 from 34.32 in October. Shipments rose to 37.6 from 26.75, and inventories rose to 1.71 from -12.5 in October, the first positive reading for inventories since February.
In a separate report Monday, the Commerce Department said business inventories unexpectedly rose 0.3 percent in September, compared with Wall Street expectations that inventories would stay flat.
Many economists hope that a dramatic draw-down of inventories in the third quarter will force companies to re-stock their shelves in the fourth and subsequent quarters, boosting manufacturing activity.
Businesses continue to face pricing pressures, though they eased a bit. The survey's "prices paid" index rose to 9.4 from 7.69 in October, while its "prices received" index improved to -4.27 from -10.58.
The Fed has long been worried about the inability of many U.S. companies, especially goods manufacturers, to raise their prices. With commodity prices rising, the fear is that corporate profitability will be pinched, resulting in belt-tightening and a continued reluctance to hire new workers.
With this fear of "disinflation" in mind, Fed officials have said they are likely to keep their target for the federal funds rate, an overnight bank lending rate, low for a long time. Low rates make borrowing cheaper, which the Fed hopes will boost the demand for and prices of goods.
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