The 2020 Mid-Year Economic Update_long

Chicago Fed National Activity Index Drops in January

Decline led by production-related indicators.

Led by declines in production-related indicators, the Chicago Fed National Activity Index (CFNAI) decreased to -0.39 in January from -0.03 in December. Two of the four broad categories of indicators that make up the index decreased from December, and two of the four categories made negative contributions to the index in January.

The index’s three-month moving average, CFNAI-MA3, decreased to 0.10 in January from 0.26 in December, marking its fifth consecutive reading above zero. January’s CFNAI-MA3 suggests that growth in national economic activity was 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 decreased to 0.11 in January from 0.28 in December. 41 of the 85 individual indicators made positive contributions to the CFNAI in January, while 44 made negative contributions. 41 indicators improved from December to January, while 44 indicators deteriorated. Of the indicators that improved, 10 made negative contributions.

Employment-related indicators contributed 0.13 to the CFNAI in January, up from 0.06 in December. The unemployment rate decreased to 6.6 percent in January from 6.7 percent in December, while nonfarm payrolls increased by 113,000 in January after rising by 75,000 in the previous month. The contribution from the sales, orders, and inventories category to the CFNAI increased to 0.02 in January from -0.01 in December.

Production-related indicators contributed -0.36 to the CFNAI in January, down from 0.06 in December. Manufacturing output decreased 0.8 percent in January after rising 0.3 percent in December, and manufacturing capacity utilization decreased to 76 percent in January from 76.7 percent in the previous month.

The contribution from the consumption and housing category to the CFNAI moved down to -0.18 in January from -0.14 in December. Housing starts declined to 880,000 annualized units in January from 1,048,000 in December, and housing permits declined to 937,000 annualized units in January from 991,000 in the previous month.

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