Every month the Federal Reserve’s Chicago branch mashes up an index using 85 separate economic reports; the broad scope and frequency of this report causes it to be one of our favorite indicators here at Atlas. And it is for that reason that it breaks our heart when behaving in a disappointing fashion like it did in March, falling to a negative -0.23 level. This drop is all the worse since February was revised from a plus 0.44 up strongly to the 0.76 level. It’s like having your kid fail his final after bringing home an A on midterms.
What a negative reading suggests is our nation’s economic activity has suddenly fallen below its historic trend. Obviously there can be quite a bit of volatility in this monthly data. Because of that we like to follow a three-month moving average instead. Alas, no relief here either as that figure fell from a positive 0.12 (revised from 0.9) to a negative -0.01 trend.
What happened? For one thing, while various indicators of production managed to cobble together a meager positive 0.01, this was a substantial decline from the positive 0.47 reading seen in February. Additionally, declines were registered in unemployment (-0.06) and the sales/orders/inventories component (off -0.02), both of which had been positive the prior month. Further, consumption and housing provided a hugely negative pull, down -0.14 for the second month running.
These figures point to a growth rate slipping below its historic trend. They don’t yet point to outright contraction. Perhaps the best summary is one which uses a hackneyed phrase: welcome to the “new normal.” (by J R)