On a day when traders were primed to rally stocks anyway, the U.S. NAPM Non-Manufacturing Index for November surprised on the upside today.

The NAPM services index spiked more than 10 points last month, moving back above the 50 mark, fully recouping the ground lost in October.

This is stronger recovery than seen in the NAPM report for manufacturers, which did not quite fully reverse October’s losses. “In another sign that the U.S. economy is healing from the post-Sept. 11 shock, non-manufacturers reported a surprisingly big rebound in activity in November,” observes BMO Nesbitt Burns.

However, BMO notes that the news wasn’t all positive. The prices paid index careened lower to yet another record low of 38.5, it notes, driving home the point that inflation is a non-issue and pricing power remains weak. “Against this backdrop, profit margins will remain under strain. As well, the employment index barely edged up, and remains below its September level at just 44.3, suggesting that payrolls will continue to weaken in the months ahead.”

“There is no doubt that this report is significantly better than expected. While encouraging, this report is quite volatile and has not established a long track record,” says BMO. “Moreover, there is still pronounced weakness in employment and pricing power, even among service industries, suggesting that inflation will continue to moderate.”