Chicago Fed Index Indicates ThatEconomic Activity Improved Further

The Chicago Federal Reserve Bank reported that its June National Activity Index rose further to the highest level since July of last year. The reading of -1.80 was up from May 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 JUnel CFNAI. Twenty-two 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 a separate survey, the Chicago Fed indicated that its Midwest manufacturing index fell during May to its lowest level since 1994. Indicators for the auto, steel, and machinery each fell. The Chicago Federal Reserve figures are available in Haver's SURVEYS database.

Today's testimony by Fed Chairman Ben S. Bernanke is available here.

Recession in the U.S. economy prompted a lower retail price for gasoline last week. The pump price for regular gasoline fell to an average $2.46 per gallon, down twenty-three cents from last month's high. Nevertheless, prices remained up by eighty-five cents (53%) from the December low. In the cash market, gasoline prices yesterday continued to rally off last week's low. At $1.75 per gallon the price was up from the low of $1.60. The figures are reported by the U.S. Department of Energy and can be found in Haver's WEEKLY & DAILY databases.

Crude oil prices also fell last week, but not by as much as gasoline costs. Light sweet crude oil prices (WTI) fell to $61.27 per barrel, off nearly ten dollars from last week's high of $70.83. Yesterday the one-month futures price for light sweet crude oil recovered and moved up to $63.98 per barrel. Prices had reached a daily high of $72.68.

The ongoing recession lowered the demand for motor gasoline by 2.2% y/y during the last four weeks. The rate of decline has moderated from the 4.8% shortfall this past autumn. Demand for distillate also is off by a sharp 21.5% though residual fuel oil demand has moved higher. Finally, oil remains plentiful as evidenced by a 13.7% y/y rise in inventories of crude oil & petroleum products. The figures on crude oil inventories are available in Haver's OILWKLY database.

The weakening of natural gas prices stabilized last week at the seven-year low. Last week's average price of $3.28 per mmbtu (-70.8% y/y) was down by three-quarters from the high reached in early-July of $13.19/mmbtu.

The strengthening of chain store sales around the July 4th holiday faded as the month progressed. During the latest week, chain store sales rose 0.5% but that recovered just half of the prior week's decline. So far in July sales have increased 0.7% since June after that month's 0.3% decline and a 0.2% May downtick.

During the last ten years there has been a 69% correlation between the year-to-year growth in chain store sales and the growth in general merchandise sales. The weekly figures are available in Haver's SURVEYW database.

The ICSC-Goldman Sachs retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.