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Chicago Fed National Activity Index Improves in December

The Chicago Fed National Activity Index increased to 0.03 in December from -0.40 in November, led by gains in employment- and production-related indicators. December marked the first time in five months that the index had a positive reading. Three of the four broad categories of indicators that make up the index made positive contributions, while the consumption and housing category continued to make a large negative contribution.

The index's three-month moving average, CFNAI-MA3, increased to
-0.22 in December from -0.36 in November. The CFNAI-MA3 suggests that despite the improvement in December, growth in national economic activity remained below its historical trend for the seventh consecutive month. 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.

Production-related indicators made a contribution of 0.26 to the index in December, up from 0.04 in November. Total industrial production rose 0.8 percent in December after increasing 0.3 percent in November. Similarly, manufacturing industrial production rose 0.4 percent in December after increasing 0.3 percent in November, and the manufacturing capacity utilization rate increased to 73.2 percent in December from 72.9 percent in the previous month.

Employment-related indicators made a contribution of 0.15 to the index in December, up from -0.11 in November. Total nonfarm payroll employment rose by 103,000 in December after increasing by 71,000 in the previous month. In addition, the unemployment rate declined to 9.4 percent in December from 9.8 percent in November, and initial claims for unemployment insurance also decreased over the same time period.

The sales, orders, and inventories category made a contribution of 0.05 to the index in December, up slightly from 0.04 in November. In contrast, the consumption and housing category contributed -0.43 to the index in December, down from -0.39 in November. Housing starts declined to 529,000 annualized units in December from 553,000 in the previous month.

Forty-five of the 85 individual indicators made positive contributions to the index in December, while 40 made negative contributions.

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