US: Chicago Fed National Activity Index

Mon Sep 25 07:30:00 CDT 2017

Consensus Consensus Range Actual Previous Revised
Level 0.11 -0.25 to 0.13 -0.31 -0.01 0.03
3 Month Moving Average -0.04 -0.05 0.00

Hurricane Harvey made its effects felt in the national activity index which fell to minus 0.31 in August for the weakest showing since August last year. The 3-month average fell to minus 0.04 for only the second negative score this year. Negative readings in this broad composite are consistent with subpar economic growth.

Negative pull came especially from the production component as industrial production, hit by Harvey dislocations, showed declines for all 3 components -- manufacturing, mining and utilities. Also weak was personal consumption & housing with retail sales pulled down by weak auto sales, another likely Harvey effect centered in Houston, and also housing starts where the South showed sharp Harvey-related effects.

Positive contributions came from employment, where August payroll growth was solid at 156,000, and also sales, orders & inventories where a boost came from a sharp inventory build in the ISM manufacturing report. But today's report is about weakness not strength and the prospect of Hurricane Irma's impact on Florida points to similar trouble for the September report.

Market Consensus Before Announcement
August is difficult to assess given Hurricane Harvey's late month hit on Houston which hurt industrial production and construction. August payroll data were also soft but were sampled before the Harvey's landfall. Forecasters see the national activity index rising slightly to 0.11 vs minus 0.01 in July.

The Chicago Fed National Activity Index (CFNAI) is a monthly index that tracks overall economic activity and inflationary pressures. 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 over time, a positive index reading corresponds to growth above trend and a negative index reading corresponds to growth below trend.

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.