Led by declines in production-related indicators, the Chicago Fed National Activity Index decreased to -0.64 in February, down from
-0.04 in January. Three of the four broad categories of indicators that make up the index deteriorated, and only the sales, orders, and inventories category made a positive contribution.

The index’s three-month moving average, CFNAI-MA3, decreased to -0.39 in February from -0.13 in January, but for the second consecutive month, it was higher than at any point since December 2007. February’s CFNAI-MA3 suggests that growth in national economic activity was below its historical trend. With regard to inflation, the amount of economic slack reflected in the CFNAI-MA3 indicates low inflationary pressure from economic activity over the coming year.

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Production-related indicators made a negative contribution to the index for the first time in eight months, contributing -0.08 to the index in February compared with +0.41 in January. Adverse weather conditions played a part in both manufacturing industrial production decreasing 0.2 percent in February and manufacturing capacity utilization decreasing for the first time in eight months.

Most of the weakness in the index continued to stem from the consumption and housing category. This category’s contribution to the index was -0.45 in February, down slightly from -0.44 in January. Housing starts decreased to 575,000 annualized units in February from 611,000 in January.

Employment-related indicators also made a negative contribution to the index, contributing -0.16 to the index in February compared with -0.02 in January. Payroll employment declined by 36,000 in February after decreasing by 26,000 in January, and average weekly hours worked in manufacturing declined to 40.3 in February from 40.7 in the previous month.

The sales, orders, and inventories category made a positive contribution to the index for the sixth consecutive month. This category contributed +0.05 in February, up from +0.02 in January. The Institute for Supply Management’s Manufacturing Purchasing Managers’ Inventories Index increased to 47.3 in February from 46.5 in January.

Thirty-four of the 85 individual indicators made positive contributions to the index in February, while 51 made negative contributions. Forty indicators improved from February to January, while 45 indicators deteriorated. Of the indicators that improved, 20 made negative contributions. The index was constructed using data available as of March 18, 2010. At that time, February data for 52 of the 85 indicators had been published. For all missing data, estimates were used in constructing the index.

The January monthly index was revised to -0.04 from an initial estimate of +0.02. 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 small downward revision to the January monthly index was due primarily to differences between the estimates of previously unavailable data and subsequently published data.