The 2020 Mid-Year Economic Update_long

Chicago Fed National Activity Index Up in July

Employment-related indicators contributed 0.13 to the CFNAI in July, down from 0.26 in June.

Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) rose to 0.39 in July from 0.21 in June. Three of the four broad categories of indicators that make up the index made positive contributions to the index in July, and two of the four categories increased from June.

The index’s three-month moving average, CFNAI-MA3, increased to 0.25 in July from 0.16 in June, marking its fifth consecutive reading above zero. July’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 0.31 in July from 0.21 in June. Fifty-three of the 85 individual indicators made positive contributions to the CFNAI in July, while 32 made negative contributions. Forty-eight indicators improved from June to July, while 36 indicators deteriorated and one was unchanged. Of the indicators that improved, nine made negative contributions.

Production-related indicators made a contribution of 0.31 to the CFNAI in July, up from 0.05 in June. Manufacturing production rose 1.0 percent in July after rising 0.3 percent in June, and manufacturing capacity utilization rose to 77.8 percent in July from 77.2 percent in the previous month.

Employment-related indicators contributed 0.13 to the CFNAI in July, down from 0.26 in June. The unemployment rate increased to 6.2 percent in July from 6.1 percent in June; however, average weekly initial unemployment insurance claims decreased to 293,500 in July from 315,000 in the previous month. The contribution of the sales, orders, and inventories category to the CFNAI ticked down to +0.05 in July from +0.06 in June.

The contribution of the consumption and housing category to the CFNAI edged up to –0.10 in July from –0.15 in June. Housing starts rose to 1,093,000 annualized units in July from 945,000 in June, and housing permits increased to 1,052,000 annualized units in July from 973,000 in the previous month.

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