October Chicago Fed National Activity Index

The Federal Reserve Bank of Chicago’s National Activity Index (CFNAI) slipped in October. The reading dropped to -0.18 from an upwardly revised 0.18 in the prior period (the initial count was 0.14). While negative, a reading this close to zero only suggests the economy moved slower than its historical trend for the month.

Three of the four broad categories decreased from September’s tally. The lone positive offering came from the sales, orders and inventory portion of the economy, but even this contribution was less positive than a month earlier. Production was down in the month, but this was probably influenced largely by the industrial production figure, and Tropical Storm Karen in the Gulf of Mexico was mostly to blame for its poor performance in October. The consumption and housing category was less negative in the period. Finally, employment fell to -0.5 after being positive in September.

The one month tally in this indicator can be volatile, so Atlas pays attention to the three-month moving average as a gauge of the economy’s overall health relative to our nation’s historic trend. This improved and turned positive for the first month since February 2013. This reading of 0.06 does not suggest a red hot economy, but it points to growing output nonetheless.

Like many indicators, CNFAI illustrated growth in America but did not flash signs of price pressures. Inflation becomes a concern in this indicator when the three month average is above 0.7 after two years of economic expansion. The current cyclical upswing is now older than two years, but there appears to be room for acceleration without inflation becoming a problem. (by C. Cox)