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Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) increased to 0.00 in September from -1.17 in August. All four broad categories of indicators that make up the index increased from August, and each one except the consumption and housing category made a positive contribution to the index in September.
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The index’s three-month moving average, CFNAI-MA3, increased from -0.53 in August to -0.37 in September – its seventh consecutive reading below zero. September’s CFNAI-MA3 suggests that growth in national economic activity was below its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year.
The CFNAI Diffusion Index also moved up in September, increasing to -0.18 from -0.27 in August. Thirty-nine of the 85 individual indicators made positive contributions to the CFNAI in September, while 46 made negative contributions. Sixty-one indicators improved from August to September, while 23 indicators deteriorated and one was unchanged. Of the indicators that improved, 29 made negative contributions.
Production-related indicators contributed +0.03 to the CFNAI in September, up significantly from -0.72 in August. Total industrial production rose 0.4 percent in September after decreasing 1.4 percent in August.
Employment-related indicators contributed +0.12 to the CFNAI in September, up from -0.06 in August. The unemployment rate dropped to 7.8 percent in September from 8.1 percent in August; and nonfarm payrolls increased 114,000 in September, compared with 142,000 in August. The contribution from the sales, orders, and inventories category to the CFNAI also increased in September, moving up to +0.04 from -0.14 in August.
The contribution from the consumption and housing category to the CFNAI increased to -0.19 in September from -0.24 in August. Housing starts increased substantially, jumping from 758,000 annualized units in August to 872,000 in September – the highest level since July 2008. Housing permits increased as well, rising from 801,000 annualized units in August to 894,000 in September.