Based on a weighted average of 85 different indicators, the Chicago Fed Index provides an overall picture of our nation’s economy. An above-zero reading denotes economic activity exceeding historical levels, while a negative number implies a historically underperforming economy.
While this latest news is far from spectacular, the index’s three-month moving average still points to (very) slow and steady progress. After clocking in at a revised 0.04 for March, the three-month moving average increased to 0.19 points.
According to the report, production-related indicators were the main reason for this month’s index decline. Manufacturing production growth took a hit, as did manufacturing capacity utilization.
Although the Chicago Fed noted that “growth in national economic activity was slightly above its historical trend,” it said this minimal growth level “suggests limited inflationary pressure from economic activity over the coming year.” By reducing the future value of your money, inflation incentivizes consumers and sellers to spend money today, thereby increasing economic activity.
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While the latest Consumer Price Index, a measure of inflation, increased at an unexpectedly high 0.2% month-to-month in March, the annual rate has just recently made headway toward the Federal Reserve’s 2% target.
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