Chicago Fed Nat'l Activity Index Suggests Above Trend Growth

The National Activity Index (CFNAI) compiled by the Federal Reserve Bank of Chicago has improved since the low this past March and suggests that US economic growth has strengthened. Despite a dip in July to 0.16 from 0.40 in June, the three-month moving average of the CFNAI improved to 0.23 versus the low near zero.

A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth.

The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production and income, the labor market, personal consumption and housing, manufacturing and trade sales, and inventories & orders.

During the last twenty years there has been a 74% correlation between the level of the CFNAI and q/q growth in real GDP.

The latest CFNAI report is available here.

The Russian economy has maintained a firm uptrend through the summer, according to the "Five Basic Indicators", measures of output in leading goods-related sectors. In June, the combined output gauge was up 6.4% from a year earlier, stronger than May's 4.1% and last year's 5.2%. The component items for July, although not the total index, were reported this week, several of them today by the Federal Service of State Statistics, and they suggest that the momentum may have slowed somewhat. These indicators cover agriculture, industrial production, retail trade, construction and transportation. The data, contained in Haver's EMERGECW database, are not seasonally adjusted and are reported as year-on-year percentage changes. The industrial production segment gained 4.9% in July, compared with 6.9% in June and 4.6% in 2004. Retailing kept up double-digit gains, although these are a bit slower than they were during 2004. Construction and agricultural activity, by contrast, picked up considerably in July after a sluggish pace in the spring. Transportation was quite vigorous in 2002 and 2003, but has had only modest increases since then.

The volume increases in retail trade are perhaps most impressive. Russian consumers are evidently able to raise their purchasing, despite double-digit increases also in consumer prices. And since retailing is expanding so much more rapidly than industrial activity, we'd surmise that inventories are tight and that imports are continuing to flow in rapidly. Through the second quarter, total imports of goods were up 28.5% from their year earlier pace (before adjustment for inflation).

The rapid inflation makes it difficult to be unabashedly optimistic about a sustained expansion for the Russian economy, but the persisting advances in goods-producing sector output volume are encouraging. Russia's status as an oil exporter also means that rising energy costs are partially offset by the support energy sales give to incomes and profits for those employed in that sector.