Global| May 20 2013U.S. Chicago Fed National Activity Index Suggests Economic Weakness
by:Tom Moeller
|in:Economy in Brief
Summary
The Chicago Federal Reserve reported that its April National Activity Index (CFNAI) declined to -0.53 from an unrevised -0.23 in March. The three-month moving average was relatively stable at -0.04, its lowest reading since October. [...]
The Chicago Federal Reserve reported that its April National Activity Index (CFNAI) declined to -0.53 from an unrevised -0.23 in March. The three-month moving average was relatively stable at -0.04, its lowest reading since October. During the last ten years, there has been a 79% correlation between the Chicago Fed Index and the q/q change in real GDP.
The Production & Income component again showed the greatest m/m deterioration as it fell to roughly its lowest level since August. The other component series were fairly stable m/m, but the Employment, Unemployment & Hours series remained at nearly its lowest in nine months. The Sales, Orders & Inventories component also was roughly unchanged m/m but it remained in negative territory. The Personal Consumption & Housing reading remained negative but has stayed in the improved trend since the middle of 2011. The Chicago Fed reported that during April, 32 of the 85 individual indicators made positive contributions to the overall index while 53 made negative contributions.
The CFNAI is a weighted average of 85 indicators of national economic activity. It is constructed to have an average value of zero and a standard deviation of one. Since economic activity tends toward trend growth rate over time, a positive index reading corresponds to growth above trend and a negative index reading corresponds to growth below trend.
The Chicago Federal Reserve figures are available in Haver's SURVEYS database.
The Delayed Recovery of Investment in Nonresidential Structures from the Federal Reserve Bank of Cleveland can be found here http://www.clevelandfed.org/research/trends/2013/0513/core.cfm
| Chicago Federal Reserve Bank | Apr | Mar | Feb | Apr'12 | 2012 | 2011 | 2010 |
|---|---|---|---|---|---|---|---|
| CFNAI | -0.53 | -0.23 | 0.63 | -0.02 | -0.08 | -0.08 | 0.02 |
| 3-Month Moving Average | -0.04 | -0.05 | 0.08 | -0.13 | -- | -- | -- |
| Personal Consumption & Housing | -0.17 | -0.15 | -0.14 | -0.24 | -0.22 | -0.30 | -0.30 |
| Employment, Unemployment & Hours | 0.00 | 0.01 | 0.35 | -0.08 | 0.10 | 0.14 | 0.03 |
| Production & Income | -0.34 | -0.04 | 0.39 | 0.29 | 0.04 | 0.05 | 0.20 |
| Sales, Orders & Inventories | -0.01 | -0.04 | 0.03 | 0.01 | -0.01 | 0.04 | 0.09 |
by Tom Moeller May 20, 2013
The National Association for Business Economics raised the median expectation for real GDP growth to 2.9% for next year from the 2.8% estimate in its November survey. That follows a 2.1% growth projection for this year. Quarterly growth is expected to improve to 3.0% by Q2'14 and remain at that pace through year-end. Personal consumption expenditures growth is forecast to improve to a still-moderate 2.6% next year. That would, nevertheless, be its fastest growth rate since 2006. Growth in residential investment should continue to be the economy's strongest sector with a second year of 15.0% growth. Business investment growth should follow as producers durable equipment gains 6.8% and spending on structures increases 5.2%. Inventory investment and real net exports should remain roughly stable at current levels.
Expectations call for an upwardly-revised 1.18M housing starts in 2014 after 1.00M during this year. Expected light vehicle sales show further improvement to 15.9M after a raised 2013 expectation of 15.4M. Forecasted average monthly gains in payroll employment this year of 198,000 were improved slightly from the last forecast and up from the 168,000 rise projected for this year. The unemployment rate is expected to average 7.1% for all of next year, a slight downward revision. The forecast for consumer price inflation remains low at 2.0% versus a downwardly revised 1.8% projection for 2013. Expectations for the core PCE price index are for a 1.8% advance in 1014 after a 1.5% rise this year and last.
Recent improvement in the bond market is expected to end with continued economic growth. The forecasted 2.81% interest rate on 10-year Treasury notes at the end of next year was raised slightly from six months ago but the Fed still is not expected to raise rates. The forecast for 7.5% corporate profit growth in 2014 is improved from a 5.3% rise this year. These growth rates remain well below the 23.2% gain in 2010, when the economic recovery first got going, and 16.1% growth in 2012. Moderate economic growth is forecast to reduce the Federal government budget deficit to $707 billion in 2014, half its $1.4 trillion peak in 2009.
The figures from the latest NABE report can be found in Haver's SURVEYS database.
Economic Prospects for the Long Run is the title of Saturday's speech by Fed Chairman Ben S. Bernanke and it can be found here http://www.federalreserve.gov/newsevents/speech/bernanke20130518a.htm
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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