The Associated Press

WASHINGTON - A batch of new economic reports Wednesday provided fresh evidence that the U.S. economy is continuing to gain momentum, with an unexpectedly sharp narrowing of the trade deficit and a strengthening of business activity in most parts of the country as the new year began.

The Federal Reserve reported in a nationwide survey that the economy continued to rebound from late November to the early part of this year, with retailers reporting a boost from a late surge in holiday shopping and even growing signs that the nation's battered manufacturing sector was beginning to pull out of its steep nose-dive.

The Fed survey, compiled from reports from the Fed's 12 regional banks, said "the nation's economy has continued to strengthen" into the early part of January, with gains in such areas as auto and home sales and hints that rising orders were prompting manufacturers to begin rehiring some of the 2.8 million factory workers laid off over the past 31/2 years.

In another encouraging sign, the Commerce Department said Wednesday that the nation's trade deficit posted a surprising decline to $38 billion in November, down 8.6 percent from the October deficit and the smallest imbalance in 13 months.

The narrowing deficit reflected a 2.9 percent jump in exports to $90.6 billion, led by a surge in sales of civilian aircraft and soybeans and other farm products. Imports, which had hit a record high the previous month, dipped 0.8 percent to $128.6 billion in November.

A third report Wednesday showed that the 13.5 percent drop in the dollar against other major currencies over the past year had not triggered one unwelcome side effect, rising inflation. A falling dollar makes U.S. exports cheaper on global markets but also raises the costs of imports to consumers.

The Labor Department reported, however, that inflation at the wholesale level rose just 0.3 percent in December, reflecting a jump in energy prices. The Producer Price Index of wholesale prices had fallen by 0.3 percent in November.