US: Chicago Fed National Activity Index

Mon Jun 25 07:30:00 CDT 2018

Consensus Consensus Range Actual Previous Revised
Level 0.37 0.30 to 0.65 -0.15 0.34 0.42
3 Month Moving Average 0.18 0.46 0.48

Manufacturing's unusual decline in May pulled the national activity index, at minus 0.15, into the negative column for the first time since January this year. The 3-month average is still in the plus column though the level, at 0.18, is also the lowest since January.

Yet the results look skewed. Production indicators pulled the index down 0.29 points which ultimately reflects a sharp downturn in factory hours during the month, but this decline is tied to a fire at an auto supplier that disrupted the supply chain in the auto sector. Other factory indicators were mostly positive including yet another month of standout strength for ISM new orders.

Employment indicators contributed 0.13 to May's index, up slightly from 0.12 in April and a reminder of the economy's fundamental strength. Despite employment, consumer & housing indicators remain slightly in the negative column, at minus 0.04 in May vs minus 0.03 in April. A decline in housing permits was a negative for May. The index's fourth component -- sales, orders, inventories -- made a contribution of 0.05 to May, up from no contribution (zero) in April.

Market Consensus Before Announcement
After slowing at the outset of the year, the national activity index is back at its expansion best, posting 0.34 in April and 0.32 in March to indicate well above average growth. Though employment will give a boost to May, weakness in industrial production may hold the index back. Consensus for May is a further gain to 0.37.

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.