Chicago Fed Shows National Economic Activity Rebounded in September

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The Federal Reserve Bank of Chicago may be a regional branch of the Federal Reserve system, but it releases an economic index that tracks national business activity. This is the Chicago Fed National Activity Index (CFNAI), and it rose to +0.17 in September from −0.37 in August due to strength in production-related indicators.

Bloomberg had a consensus estimate of −0.10 for September, and the EconDay range was −0.17 to +0.09. There was a snapback effect from Hurricane Harvey, and employment contributed positively as well. The numbers in sales and the new orders and inventories were moderately positive, while personal consumption and housing numbers contributed a moderate drag against the positive number.

Still, the Chicago Fed indicated that all four broad categories of indicators that make up the index increased from August. Three of the four categories made positive contributions to the overall boost in September.

The Chicago Fed National Activity Index was constructed using data available as of October 19, 2017. At that time, September data for 51 of the 85 indicators had been published.

The Diffusion Index ticked up to −0.19 in September from −0.20 in August. All in all, 46 of the 85 individual indicators made positive contributions to the index. There were 39 individual indicators that made negative contributions. Of the indicators that improved, 17 made negative contributions.

Individual parts of the CFNAI for September were shown as follows:

  • The contribution from production-related indicators to the CFNAI increased to +0.10 in September from −0.33 in August.
  • Total industrial production increased 0.3% in September after moving down 0.7% in August.
  • The sales, orders and inventories category also made a positive contribution to the CFNAI in September, edging up to +0.07 from +0.06 in August.
  • Employment-related indicators contributed +0.06 to the CFNAI in September, up from +0.01 in August.
  • Civilian employment increased by 906,000 in September after decreasing by 74,000 in August.
  • The civilian unemployment rate slipped to 4.2% in September from 4.4% in August.
  • Nonfarm payrolls decreased by 33,000 in September after increasing by 169,000 in August.
  • The contribution of the personal consumption and housing category to the CFNAI increased to −0.07 in September from −0.11 in August.
  • Consumption indicators improved, on balance, pushing up the category’s overall contribution.
  • Housing starts decreased to 1,127,000 annualized units in September from 1,183,000 in August, and housing permits fell to 1,215,000 annualized units in September from 1,272,000 in the previous month.

The CFNAI is a weighted average of 85 existing monthly indicators of national economic activity. This index is constructed to have an average value of zero and a standard deviation of one. As economic activity tends toward trend growth over time, a positive index reading is intended to correspond to growth above trend while a negative index reading corresponds to growth below trend.