US: Chicago Fed National Activity Index

Thu Jul 23 07:30:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
Level -0.05 -0.11 to 0.05 0.08 -0.17 -0.08
3 Month Moving Average -0.01 -0.16 -0.07

June proved to be a slightly stronger month for the economy than expected, based on the national activity index which came in at plus 0.08 vs Econoday expectations for a 0.05 dip. The 3-month average is still in the negative column though just barely at minus 0.01.

Production indicators showed the most improvement in June, at minus 0.01 vs minus 0.08 in May. The gain here reflects strength in the utilities and mining components of the industrial production report where, however, manufacturing remained flat. Employment also improved, to plus 0.12 from May's plus 0.06, here reflecting the 2 tenth downtick in the unemployment rate to 5.3 percent. This dip, however, was tied to a decrease in those looking for work which is not a sign of job strength. Personal consumption & housing, at minus 0.07, was little changed as was the sales/orders/inventories component at plus 0.03.

This report is a bit of a head fake, not reflecting the weakness in manufacturing and the special factor behind the decline in the unemployment rate. In sum, growth in the economy is no better than the historical average which is a disappointment, showing little bounce from the weak first quarter.

Market Consensus Before Announcement
June was a soft month for the economy as the employment and retail sales reports both proved weak. But forecasters see only limited weakness for the national activity index where the consensus is calling for a marginally negative reading of only 0.05.

The Chicago Fed National Activity Index (CFNAI) is a monthly index designed to better gauge overall economic activity and inflationary pressure. The CFNAI is released at 8:30 a.m. E.T. normally toward the end of each calendar month. The CFNAI is a weighted average of 85 existing monthly indicators of national economic activity. It is constructed to have an average value of zero and a standard deviation of one. Since economic activity tends toward trend growth rate over time, a positive index reading corresponds to growth above trend and a negative index reading corresponds to growth below trend.

The 85 economic indicators that are included in the CFNAI are drawn from four broad categories of data: production and income; employment, unemployment, and hours; personal consumption and housing; and sales, orders, and inventories. Each of these data series measures some aspect of overall macroeconomic activity. The derived index provides a single, summary measure of a factor common to these national economic data.

This index is unique among regional Federal Reserve Bank indexes in that it is national in scope. Investors are eager to have insight into economic growth and inflation. This index combines 85 diverse and already released indicators from four broad categories -- production and income; employment, unemployment, and hours; personal consumption and housing; and sales, orders, and inventories -- into an overall index to measure economic performance. The index provides another measure with which investors can measure overall growth.