The Empire index staged a stunning recovery in November to reach its highest level in nearly three years. Expectations called for 0.0 and we get 31.2 versus minus 11.9 in October!

The rise was propelled by new orders at 28.0 in November, up from minus 10.2 in October, an amazing swing and a very positive sign for the future. Shipments jumped to 32.5 from minus 2.7. Employment was a little disappointing at 0.9 versus 4.1 a month ago.

With the better business conditions, price increases were pretty stable with prices paid at 27.8 versus 29.0 and prices received at 12.4 versus 10.8.

Six-month expectations came in at 33.2 in November versus 38.7 in October.

Forecasts call for the index to creep up to a neutral 0.0 in November after a negative 11.9 reading in October. Manufacturing activity has been contracting and 0.0 in November is not inspiring.

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.