Chicago Fed August Index Leaps Into Positive Territory

Another indicator of the health of the U.S. economy posted a sharp gain last month. The Chicago Fed National Activity Index (CFNAI) for August leaped from a revised reading of −0.41 to +0.10. That’s near the June reading of +0.13 but well below the August 2018 score of +0.46.

The consensus estimate from economists called for a reading of −0.06. The CFNAI three-month moving average also improved, from a reading of −0.14 in July to −0.06 in August, the best score in six months.

The August index score indicates above-average economic growth, and the three-month moving average underlines U.S. economic expansion. Neither score reflects a coming period of sustained rising inflation.

The CFNAI diffusion index, a three-month moving average that measures the degree to which a change in the monthly index is spread out among its 85 indicators, improved from −0.20 in July to −0.12 in August. In August of 2018, the diffusion index was +0.27.

Of the 85 individual indicators included in the CFNAI, 44 made positive contributions in August, while 41 made negative contributions. Month over month, 52 indicators improved, 30 deteriorated and three were unchanged. Of the indicators that improved, 14 made negative contributions.

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Manufacturing posted a solid month-over-month gain in August, rising to +0.16 from a July reading of −0.26. Industrial production also rose following a decline in July. Modest gains in sales, orders and inventories contributed to the improved August index.

Employment indicators improved last month, rising from −0.05 in July to −0.02. Personal consumption and housing indicators ticked higher, from −0.03 to −0.02.

The CFNAI has posted consistently lower readings this year than the gross domestic product (GDP) estimates. On Thursday, the final GDP estimate for the second quarter is expected to be 2.0, unchanged from the first-quarter reading. While the GDP estimate is positive if not outstanding, the CFNAI three-month moving average for June, which was revised upward slightly to −0.28 in Monday’s report, indicates a weaker expansion.

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