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NY Fed Manufacturing Index Hits Three-Year High

Manufacturing activity in New York State factories jumped unexpectedly in October to its highest level in more than three years, the New York Federal Reserve said on Monday.

The stronger reading pressured U.S. government bond prices lower and briefly pushed U.S. equity index futures higher.

The New York Fed's "Empire State" general business conditions index rose to 28.75 in October from 14.7 in September. It was the highest reading since July 2004.

Economists polled by Reuters had expected an October reading of 13.00.

The index on new orders rose to 24.97 in October from 13.56 in September, while the reading on shipments increased to 28.59 in October from 5.09 in September.

Ian Shepherdson, chief U.S. economist at High Frequency Economics, said New York manufacturers have been helped by weak U.S. dollar. The greenback has lost about 6.7 percent of its value versus six major trading partner currencies year-to-date.

"A greater proportion of Empire State respondents are exporters than in manufacturing across the county as a whole, so they are benefitting disproportionately from the drop in the dollar," Shepherdson said in a note.

He did not expect other regional reports to replicate the New York manufacturing jump.

The survey of manufacturing plants in the state is one of the earliest monthly guideposts to U.S. factory conditions.

In addition to stronger new orders and shipments, the inventories component edged up to 3.49 in October from 3.19 in September. The prices paid component rose to 36.05 in October from 35.11 in September.

The number of employees index also increased to 20.51 in October from 18.22 in September.

U.S. government debt prices fell after the stronger-than-expected New York Fed manufacturing index data on the view that it diminished chances of a Fed interest rate cut at the end of October.

Benchmark 10-year notes were down 6/32 in price for a 4.71 percent yield, up from 4.69 percent shortly before the data and late Friday.