Chicago Fed National Activity Index

Economic activity slowed in April according to the Chicago Fed National Activity Index (CFNAI).  The survey is comprised of 85 monthly national indicators representing four broad categories designed to replicate the movements of the overall economy.  Three of these four fell in the period.  The indicator’s three month moving average (-0.04) suggests the economy is growing slightly below trend; zero represents trend growth.

All three of the falling categories did so for at least a second consecutive month.  Production and income took the biggest hit for the period.  There appears to have been a slowdown in manufacturing to start the second quarter.  Personal consumption and housing continued to run below trend for the month.  This portion of the economy has not been keeping up with its normal run rate since May 2007!  Sales also ticked slightly lower for the period.  Only the labor market appears to be growing close to normal as its reading was 0.0 which is right in line with the trend.

The one component that sticks out in this indicator is the personal consumption and housing portion.  It has been running below trend for six years.  Despite their best efforts, the Federal Reserve has not been able to stimulate demand to a level within historic norms.  Atlas is of the opinion that, between the demographics of the country and lasting effects of the financial crisis, the level of consumption will remain subdued.  The central bank should accept the lower level and reign in some of its measures, rebuilding its supply of dry powder for the next economic confrontation.    (by C. Cox)