The 2020 Mid-Year Economic Update_long

Chicago Fed National Activity Index Improves in September

Production-related indicators bolster index's three-month moving average.

Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) rose to +0.47 in September from –0.25 in August. Three of the four broad categories of indicators that make up the index made positive contributions to the index in September, and three of the four categories increased from August.

The index’s three-month moving average, CFNAI-MA3, increased to +0.25 in September from +0.16 in August, marking its seventh consecutive reading above zero. September’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, increased to +0.24 in September from +0.18 in August. Fifty-eight of the 85 individual indicators made positive contributions to the CFNAI in September, while 27 made negative contributions. Fifty-six indicators improved from August to September, while 29 indicators deteriorated. Of the indicators that improved, 12 made negative contributions.

Production-related indicators made a contribution of +0.30 to the CFNAI in September, up from –0.20 in August. Industrial production rose 1 percent in September after decreasing 0.2 percent in August, and manufacturing capacity utilization increased to 77.3 percent in September from 77.1 percent in the previous month.

Employment-related indicators contributed +0.22 to the CFNAI in September, up from +0.04 in August. The unemployment rate declined to 5.9 percent in September from 6.1 percent in August; and nonfarm payrolls increased by 248,000 in September, up from a gain of 180,000 in August. The contribution of the sales, orders, and inventories category to the CFNAI rose to +0.08 in September from –0.01 in August.

The contribution of the consumption and housing category to the CFNAI decreased to –0.13 in September from –0.09 in August. Consumption indicators, on balance, deteriorated, pushing the category’s contribution lower. However, housing starts rose to 1,017,000 annualized units in September from 957,000 in August, and housing permits edged up to 1,018,000 annualized units in September from 1,003,000 in the previous month.

The CFNAI was constructed using data available as of Oct. 21. At that time, September data for 50 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 –0.25 from an initial estimate of –0.21, and the July monthly index was revised to +0.52 from last month’s estimate of +0.26. 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 revisions to both the August and July monthly indexes were due primarily to the latter.

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