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Economy in Brief

Several Indices of Midwest Economic Activity Improve; August PMI Moves To Break-Even
by Tom Moeller August 31, 2009

Middle America finally appears to be emerging from its sharp recession. Reporting this morning, the Chicago Purchasing Managers Association indicated that its August Business Barometer Index rose to 50, at the break-even level for the first month since last September. The increase was led by a rise in the orders and production components that breached 50 for the first month since June of last year. In addition, the order backlogs index surged to its highest level since last September. The employment series also gained but only back to its December level. The Chicago PMI figures are diffusion indexes and are available in Haver's SURVEYS database.

In a separate report issued last week, the Chicago Federal Reserve Bank reported that the National Activity Index (CFNAI) rose in July to the highest level since January of last year. The reading of -0.74 was up from June and both figures were higher than the series' low of -3.99 reached this past January. Since 1970 there has been a 74% correlation between the level of the index and the q/q change in real GDP. The three-month moving average of the index also improved to its highest level since August. An index level at or below -0.70 typically has indicated negative U.S. economic growth. A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth of roughly 3%. The complete CFNAI report is available here. The production and income components made the largest positive contributions to the July CFNAI. Thirty-five of the index components had a positive influence on the overall index while 50 had a negative influence. These figures contrast to last month's report on June activity when 22 of the index components had a positive influence while 63 made a negative contribution. The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production & income, the labor market, personal consumption & housing, manufacturing & trade sales, and inventories & orders.

In yet a third survey, the Chicago Fed indicated that its Midwest manufacturing index improved slightly during July and recovered declines during the prior two months. Nevertheless, the figure remained near the lowest since 2003. Indicators for the auto and steel sectors rose while machinery fell. The Chicago Federal Reserve figures also are available in Haver's SURVEYS database.

Clearing and settlement of exchange traded derivatives from the Federal Reserve Bank of Chicago can be found here.  

August July June Aug. '08 2008 2007 2006
Chicago Purchasing Managers Index 50.0 43.4 39.9 56.4 46.8 54.4 56.8
   New Orders 52.5 48.0 41.6 58.0 46.7 57.7 59.9
   Production 52.9 43.3 39.3 61.2 48.1 58.3 60.3
   Employment 38.7 35.3 28.9 39.2 41.4 51.5 51.6
Chicago Fed Nat'l Activity Index -- -0.74 -1.82 -1.29 (July '08) -1.77 -0.35 0.05
  3-Month Moving Average -1.69 -2.18 -1.17 -- -- --
Chicago Fed Midwest Factory Index -- 79.7 78.1 103.5 101.6 107.4 107.1
   Auto Sector -- 51.7 45.1 76.8 73.2 86.5 87.8
   Machinery Sector -- 91.6 93.6 126.4 125.3 127.7 129.1
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