Chicago Fed National Activity Index Falls Slightly in August

The Chicago Fed National Activity Index was -0.90 in August, down from -0.56 in July. Three of the four broad categories of indicators made negative contributions to the CFNAI in August; the production and income category made a positive contribution to the index for the second consecutive month.

The three-month moving average, CFNAI-MA3, improved for the seventh consecutive month. At -1.09 in August (up from -1.61 in the previous month), the CFNAI-MA3 suggests that growth in national economic activity was below its historical trend. With regard to inflation, the amount of economic slack reflected in the CFNAI-MA3 indicates low inflationary pressure from economic activity over the coming year.

The production-related indicators made a smaller positive contribution of 0.29 to the index in August compared with 0.45 in July. Industrial production increased 0.8 percent in August, down slightly from 1.0 percent in the previous month; and manufacturing production increased 0.6 percent in August after rising 1.4 percent in July. July and August marked the first consecutive increases in industrial production since November and December 2007.

The contribution of employment-related indicators also decreased in August, making a contribution of -0.63 to the index versus -0.39 in July. The unemployment rate increased to 9.7 percent in August from 9.4 percent in the previous month. In addition, manufacturing employment declined by 63,000 in August after decreasing by 43,000 in July.

The consumption and housing category's contribution to the index improved slightly in August to -0.48, following a contribution of -0.49 in July. Housing starts increased to 598,000 annualized units in August from 589,000 in the previous month. The sales, orders, and inventories category also improved in August, contributing -0.08 compared with -0.11 in July.

Thirty-one of the 85 individual indicators made positive contributions to the index in August, while 54 made negative contributions. Forty-seven indicators improved from July to August, while 37 indicators deteriorated. Of the indicators that improved, 28 made negative contributions. The index was constructed using data available as of September 21, 2009. At that time, August data for 52 of the 85 indicators had been published. For all missing data, estimates were used in constructing the index.

The July monthly index was revised to -0.56 from an initial estimate of -0.74. Revisions to the monthly index can be attributed to two main factors: revisions in previously published data and differences between the estimates of previously unavailable data and subsequently published data. The upward revision to the July monthly index was due primarily to revisions in previously published data.