Led by declines in production-related indicators, the Chicago Fed National Activity Index (CFNAI) decreased to -0.87 in August from -0.12 in July. All four broad categories of indicators that make up the index deteriorated from July, with each making a negative contribution to the index in August.
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The index’s three-month moving average, CFNAI-MA3, decreased from -0.26 in July to -0.47 in August – its lowest level since June 2011 and its sixth consecutive reading below zero. August’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 also moved lower in August, declining to -0.23 from -0.08 in July. Twenty-six of the 85 individual indicators made positive contributions to the CFNAI in August, while 59 made negative contributions. Twenty-nine indicators improved from July to August, while 55 indicators deteriorated and one was unchanged. Of the indicators that improved, 12 made negative contributions.
The contribution from production-related indicators to the CFNAI declined to -0.58 in August from +0.08 in July. Total industrial production fell 1.2 percent in August after increasing 0.5 percent in July, and manufacturing capacity utilization decreased to 77 percent in August from 77.7 percent in the previous month.
Employment-related indicators contributed -0.04 to the CFNAI in August, down very slightly from -0.02 in July. The unemployment rate edged down to 8.1 percent in August from 8.3 percent in July, but initial claims for unemployment insurance increased to 371,000 in August from 366,000 in the previous month. In addition, nonfarm payrolls increased 96,000 in August, compared with 141,000 in July.
The contribution from the consumption and housing category to the CFNAI also decreased slightly in August, moving down to -0.23 from -0.21 in July. Housing starts increased to 750,000 annualized units in August from 733,000 in July, but housing permits edged lower to 803,000 annualized units from 811,000 over the same period.
The sales, orders, and inventories category made a contribution of -0.01 to the CFNAI in August, down from +0.02 in July.