The 2020 Mid-Year Economic Update_long

Chicago Fed National Activity Index Declines in October

Drop in production-related indicators hinder index's three-month moving average.

Led by declines in production-related indicators, the Chicago Fed National Activity Index (CFNAI) moved down to +0.14 in October from +0.29 in September. Two of the four broad categories of indicators that make up the index decreased from September, and two of the four categories made negative contributions to the index in October.

The index’s three-month moving average, CFNAI-MA3, declined to -0.01 in October from +0.12 in September. October’s CFNAI-MA3 suggests that growth in national economic activity was near 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 +0.11 in October from +0.16 in September. Forty-nine of the 85 individual indicators made positive contributions to the CFNAI in October, while 36 made negative contributions. Thirty-six indica­tors improved from September to October, while 49 indicators deteriorated. Of the indicators that improved, seven made negative contributions.

Production-related indicators made a contribution of -0.01 to the CFNAI in October, down from +0.18 in September. Industrial production decreased 0.1 percent in October after rising 0.8 percent in September, and manufacturing production increased 0.2 percent in October for the second straight month.

Employment-related indicators contributed +0.16 to the CFNAI in October, down somewhat from +0.22 in September. The unemployment rate declined to 5.8 percent in October from 5.9 percent in September; however, nonfarm payrolls increased by 214,000 in October, down from a gain of 256,000 in the previous month.

The contribution of the sales, orders, and inventories category to the CFNAI rose to +0.11 in October from +0.06 in September. The Institute for Supply Management’s Manufacturing Purchasing Managers’ New Orders Index rose to 65.8 in October from 60 in the previous month.

The contribution of the consumption and housing category to the CFNAI increased to -0.12 in October from -0.17 in September. Housing permits increased to 1,080,000 annualized units in October from 1,031,000 in September. However, housing starts decreased to 1,009,000 annualized units in October from 1,038,000 in the previous month.

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