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Economy in Brief

Chicago Fed Index Shows Improvement, But It's Not Much
by Tom Moeller August 23, 2010

By returning to a level of zero, the July National Activity Index (CFNAI), reported by the Chicago Fed, recovered most of its June decline. However, lest the rise to 0.00 spark too much excitement about economic growth, the three-month moving average of the index, which smoothes out some of the series' volatility, fell to -0.17, its lowest level since February. 

Since these figures remain up from the low of -4.10 reached in January '09, they do still represent improvement. 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. The complete CFNAI report is available here. Accompanying today's release were minor benchmark data revisions.

The Chicago Fed indicated that most of the July improvement resulted from higher values for production & income. The former of these two indications is a testament to the recently strong growth in industrial output. It rose 1.1% last month and 7.7% y/y. Lesser improvement was registered by the labor market indicators while other series were roughly flat. Forty-six of the 85 individual indicators made positive contributions to the index in July, while 39 made negative contributions. The Fed also indicated that fifty-six indicators improved from June to July, while 28 indicators deteriorated and one was unchanged.

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 a separate survey, the Chicago Fed indicated that its Midwest manufacturing index slipped during June from its highest level since December 2008. Indicators for the auto and resource sectors ticked lower but nevertheless remained up sharply from the 2009 lows. The Chicago Federal Reserve figures are available in Haver's SURVEYS database.

Global Recovery Continues, but Rate of Expansion Moderates from the Federal Reserve Bank of Dallas can be found here.

Chicago Fed July June May July '09 2009 2008 2007
CFNAI 0.00 -0.70 0.19 -0.07 -1.55 -1.86 -0.31
  3-Month Moving Average -0.17 -0.12 0.26 -1.32 -- -- --
    Personal Consumption & Housing -0.43 -0.46 -0.44 -0.42 -0.45 -0.30 -0.09
    Employment, Unemployment & Hours 0.00 -0.14 0.10 -0.42 -0.77 -0.68 -0.16
    Production & Income 0.43 -0.16 0.62 0.59 -0.21 -0.60 -0.05
   Sales, Orders & Inventories 0.00 0.06 -0.08 0.19 -0.11 -0.28 -0.03
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