US: Chicago Fed National Activity Index

Mon Aug 24 07:30:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
Level 0.20 0.15 to 1.20 0.34 0.08 -0.07
3 Month Moving Average 0.00 -0.01 -0.08

July was a very solid month for the economy, based on the national activity index which rose to a stronger-than-expected plus 0.34 from June's contractionary reading of minus 0.07 (revised). July is the first gain for the index this year. The 3-month average, however, still points to softness, at zero vs. June's minus 0.08.

Production, as expected, was July's strongest component, swinging to plus 0.28 from minus 0.14 on a big upswing in the auto sector where sales are very strong. The contribution from employment was steady at a constructive plus 0.11 while the component for sales, orders & inventories slipped from 0.06 in June to only 0.01. The only component in the negative column in the month is personal consumption & housing at minus 0.06 which is, however, up from minus 10.00 in June.

Strength in the manufacturing was narrow in July and may not extend to August, while the weakness in the consumption & housing component underscores what the Fed describes as softness in household spending and continuing uncertainty over how much housing, recent strength or not, will contribute to overall economic growth.

Market Consensus Before Announcement
The national activity index is expected to post a very strong reading of 0.20 to indicate that July was the strongest month of the year for the economy. A big gain is certain for production due to the jump in the manufacturing component of the industrial production report while personal consumption & housing is certain to get a boost from July's strength in retail sales. But how strong will the other components be, especially employment? June, boosted by production, was a solid month for this index at plus 0.08.

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.