The 2020 Mid-Year Economic Update_long

Chicago Fed National Activity Index Declines in January

Two of four categories of indicators made positive contributions to the index.

Led by declines in production-related indicators, the Chicago Fed National Activity Index (CFNAI) decreased to -0.32 in January from 0.25 in December. Three of the four broad categories of indicators that make up the index decreased from December, and only two of the four categories made positive contributions to the index in January.

The index’s three-month moving average, CFNAI-MA3, increased to 0.3 in January from 0.23 in December. Given the substantial upward revisions for November and December, January’s CFNAI-MA3 marked the third consecutive reading above zero. Additionally, January’s reading 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 also moved up in January, increasing to 0.1 from 0.07 in December. Thirty-four of the 85 individual indicators made positive contributions to the CFNAI in January, while 51 made negative contributions. Thirty-three indicators improved from December to January, while 52 indicators deteriorated. Of the indicators that improved, 12 made negative contributions.

Production-related indicators negatively contributed 0.17 to the CFNAI in January, down from a positive 0.35 contribution in December. Manufacturing production decreased 0.4 percent in January after rising 1.1 percent in December, and manufacturing capacity utilization decreased to 77.6 percent in January from 78 percent in the previous month.

Employment-related indicators contributed 0.02 to the CFNAI in January, down from 0.1 in December. The unemployment rate ticked up to 7.9 percent in January from 7.8 percent in December, and nonfarm payrolls rose by 157,000 in January after increasing by 196,000 in December.

The negative contribution from the consumption and housing category to the CFNAI decreased to 0.2 in January from a negative contribution of 0.13 in December. Housing permits edged up to 925,000 annualized units in January from 909,000 in December. However, housing starts declined, dropping to 890,000 annualized units in January from 973,000 in the previous month.

In contrast to the other three categories, the contribution from the sales, orders and inventories category to the CFNAI increased in January, moving up to 0.03 from a negative contribution of 0.07 in December.

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