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Chicago Fed National Activity Index Declines in September

Led by declines in production-related indicators, the Chicago Fed National Activity Index decreased to -0.58 in September from -0.49 in August. Three of the four broad categories of indicators that make up the index slightly improved from August, but only the sales, orders, and inventories category made a positive contribution to the index in September.

The index’s three-month moving average, CFNAI-MA3, ticked down to -0.33 in September from -0.32 in August. September’s 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 suggests subdued inflationary pressure from economic activity over the coming year.

The consumption and housing category contributed -0.39 to the index in September, up slightly from -0.40 in the previous month. Housing starts edged up to 610,000 annualized units in September from 608,000 in August, while building permits decreased to 539,000 annualized units in September from 571,000 in the previous month.

Production-related indicators made a contribution of -0.17 to the index in September, down from -0.02 in August. Total industrial production decreased 0.2 percent in September after increasing 0.2 percent in the previous month. In addition, production of construction and business supplies declined 0.8 percent in September after increasing 0.4 percent in August.

Employment-related indicators made a contribution of -0.05 to the index in September, up slightly from -0.06 in August. Total nonfarm payroll employment decreased by 95,000 in September; however, private nonfarm payrolls increased by 64,000. In addition, average weekly initial claims for unemployment insurance decreased in September.

The sales, orders, and inventories category made a contribution of +0.05 to the index in September, up from -0.01 in August. The Institute for Supply Management’s Manufacturing Inventories Index rose to 55.6 in September from 51.4 in the previous month.

Forty of the 85 individual indicators made positive contributions to the index in September, while 45 made negative contributions. Forty-one indicators improved from August to September, while 44 indicators deteriorated. Of the indicators that improved, 14 made negative contributions. The index was constructed using data available as of Oct. 21, 2010. At that time, September data for 52 of the 85 indicators had been published. For all missing data, estimates were used in constructing the index.

The August monthly index was revised to -0.49 from an initial estimate of -0.53. 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 August monthly index was due primarily to revisions in previously published data.

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