The 2020 Mid-Year Economic Update_long

Chicago Fed National Activity Index Improves in July

All four broad categories of indicators improved, with production-related indicators making a positive contribution for the first time since October 2008.All four broad categories of indicators improved, with production-related indicators making a positive contribution for the first time since October 2008.

The Chicago Fed National Activity Index was -0.74 in July, up from -1.82 in June. All four broad categories of indicators improved in July, while three of the four continued to make negative contributions to the index. Production-related indicators made a positive contribution to the index for the first time since October 2008 and for only the second time since December 2007.
 
The three-month moving average, CFNAI-MA3, was -1.69 in July, up from -2.18 in the previous month. July’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.
 
The improvement in the index in July was due in large part to the production and income category of indicators. This category made a contribution of 0.26 to the index in July compared with -0.38 in June. Manufacturing production increased 1.0% in July, its biggest increase since December 2006, following a decline of 0.5% in the previous month. In addition, manufacturing capacity utilization increased to 65.4 in July from 64.7 in June.
 
Employment-related indicators also improved substantially in July, making a contribution of -0.40 to the index versus -0.73 in June. Total nonfarm payroll employment decreased 247,000 in July after declining 443,000 in the previous month, and average weekly initial unemployment insurance claims in July declined by 59,600 from June.
 
The consumption and housing category’s contribution to the index improved in July to -0.49, following a contribution of -0.54 in June. Housing starts decreased slightly to 581,000 annualized units in July from 587,000 in the previous month. However, in the Midwest housing starts increased to 114,000 annualized units in July from 101,000 in June. The sales, orders, and inventories category also improved in July, contributing -0.10 compared with -0.17 in June.
 
Thirty-five of the 85 individual indicators made positive contributions to the index in July, while 50 made negative contributions. Sixty-one indicators improved from June to July, while 23 indicators deteriorated. Of the indicators that improved, 31 made negative contributions. The index was constructed using data available as of August 20, 2009. At that time, July data for 52 of the 85 indicators had been published. For all missing data, estimates were used in constructing the index. The June monthly index was revised to -1.82 from an initial estimate of -1.80.
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