The 2020 Mid-Year Economic Update_long

Chicago Fed National Activity Index Increases in February

Three-month moving average drops below zero for first time in six months.

Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) increased to +0.14 in February from –0.45 in January. Three of the four broad categories of indicators that make up the index increased from January, and two of the four categories made positive contributions to the index in February.

The index’s three-month moving average, CFNAI-MA3, decreased to –0.18 in February from +0.02 in January, marking its first reading below zero in six months. February’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 decreased to –0.06 in February from +0.03 in January. Fifty-four of the 85 individual indicators made positive contributions to the CFNAI in February, while 31 made negative contributions. Fifty-one indicators improved from January to February, while 33 indicators deteriorated and one was unchanged. Of the indicators that improved, 15 made negative contributions.

Employment-related indicators contributed –0.02 to the CFNAI in February, down from +0.11 in January. The unemployment rate ticked up to 6.7 percent in February from 6.6 percent in January. Nonfarm payrolls increased by 175,000 in February after rising by 129,000 in January, whereas civilian employment increased by just 42,000 in February.

Production-related indicators contributed +0.26 to the CFNAI in February, up from –0.38 in January. Manufacturing output increased 0.8 percent in February after declining 0.9 percent in January, and manufacturing capacity utilization rose to 76.4 percent in February from 75.9 percent in the previous month. The contribution from the sales, orders, and inventories category to the CFNAI increased to +0.06 in February from a neutral reading in January.

The contribution from the consumption and housing category to the CFNAI moved up to –0.16 in February from –0.19 in January. Housing permits increased to 1,018,000 annualized units in February from 945,000 in January, but housing starts ticked down to 907,000 annualized units in February from 909,000 in the previous month.

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