The Dallas Fed's manufacturing survey showed the contraction in general business activity continued at about the same pace in November from October but current production dropped while employment recovered and price pressures intensified.

The Dallas Fed's general activity index came in at minus 2.7 in November versus minus 3.0 in October, minus 9.0 in September, minus 9.7 in August and minus 17.5 in July. The Econoday consensus forecast for November looked for a reading of minus 3.9.

Details in the Dallas report included new orders at minus 11.9 in November versus minus 3.7 in October, minus 5.2 in September, minus 4.2 in August and minus 12.8 in July. Production fell to minus 0.9 in November from 14.6 in October, minus 3.2 in September, 1.6 in August and minus 1.3 in July. Shipments registered minus 5.9 in November versus 1.5 in October, minus 7.4 in September, 0.8 in August and minus 16.3 in July.

Employment came in at 4.9 in November versus minus 5.1 in October, 2.9 in September, minus 0.7 in August and 7.1 in July. Wages and benefits were at 18.6 in November versus 23.5 in October, 18.5 in September, 22.0 in August and 21.1 in July.

Prices paid for raw materials registered 28.5 in November versus 16.3 in October, 18.2 in September, 28.2 in August and 23.1 in July. Prices received were 8.8 in November, 7.4 in October versus 8.4 in September, 8.5 in August and 3.4 in July.

On the six-month outlook, general business conditions registered 31.2 in November versus 29.6 in October, 11.4 in September, 11.6 in August, 21.6 in July and 12.9 in June.

Forecasters see the general business activity index staying in contraction territory at minus 3.9 in November, not much of a change from minus 3.0 in October, and versus minus 9.0 in September.

The Dallas Fed Manufacturing Survey tracks factory activity in Texas on a monthly basis. Firms are asked whether output, employment, orders, prices and other indicators increased, decreased or remained unchanged over the previous month. Responses are aggregated into balance indexes where positive values generally indicate growth while negative values generally indicate contraction. About 100 manufacturers regularly participate in the survey.

Investors track economic data like the Dallas Fed 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 will not generate inflationary pressures. The Dallas Survey gives a detailed look at Texas' manufacturing sector, how busy it is and where it is headed. Since manufacturing is a major sector of the economy, this report can have a big influence on the markets. Some of the survey indexes also provide insight on inflation pressures -- including prices paid, prices received, wages & benefits, and capacity utilization. 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 an early clue on the nation's manufacturing sector, reported in advance of the ISM manufacturing index and often in advance of the NAPM-Chicago index.