The 2020 Mid-Year Economic Update_long

Chicago Fed National Activity Index Declines in August

The index's three-month moving average also declined, but remained above zero.

Led by declines in production-related indicators, the Chicago Fed National Activity Index decreased to -0.21 in August from +0.26 in July. Two of the four broad categories of indicators that make up the index decreased from July, and two of the four categories made negative contributions to the index in August.

The index’s three-month moving average, CFNAI-MA3, decreased to +0.07 in August from +0.20 in July. August’s CFNAI-MA3 suggests that growth in national economic activity was somewhat above its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests limited inflationary pressure from economic activity over the coming year.

The CFNAI Diffusion Index, which is also a three-month moving average, decreased to +0.14 in August from +0.23 in July. Forty-five of the 85 individual indicators made positive contributions to the CFNAI in August, while 40 made negative contributions. Forty-two indicators improved from July to August, while 43 indicators deteriorated. Of the indicators that improved, 12 made negative contributions.

Production-related indicators made a contribution of -0.17 to the CFNAI in August, down from +0.24 in July. Manufacturing production decreased 0.4 percent in August after rising 0.7 percent in July, and manufacturing capacity utilization declined to 77.2 percent in August from 77.6 percent in the previous month.

Employment-related indicators made a neutral contribution to the CFNAI in August, down from +0.10 in July. The unemployment rate decreased to 6.1 percent in August from 6.2 percent in July, while nonfarm payrolls increased by 142,000 in August after rising by 212,000 in the previous month.

The contribution of the sales, orders, and inventories category to the CFNAI edged up to +0.08 in August from +0.04 in July. The Institute for Supply Management’s Manufacturing Purchasing Managers’ New Orders Index rose to 66.7 in August from 63.4 in July, reaching its highest level since April 2004.

The contribution of the consumption and housing category to the CFNAI ticked up to -0.12 in August from -0.13 in July. Consumption indicators, on balance, improved, pushing the category’s contribution higher. However, housing starts declined to 956,000 annualized units in August from 1,117,000 in July, and housing permits decreased to 998,000 annualized units in August from 1,057,000 in the previous month.

The CFNAI was constructed using data available as of September 18, 2014. At that time, August data for 51 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 +0.26 from an initial estimate of +0.39.

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