Economic Activity in the U.S. Slows Further in August -- Chicago Fed
By Xavier Fontdegloria
The U.S. economy continued to grow in August above its average
but at a slower pace compared with the previous three months, data
from the Federal Reserve Bank of Chicago showed Monday.
The Chicago Fed National Activity Index came in at 0.79 in
August, down from an upwardly revised 2.54 in July. Economists
polled by FactSet expected the index to stand at a higher 1.2.
The index, which plunged to its lower reading ever in April amid
strict lockdowns to contain the spread of the coronavirus,
rebounded strongly in the next months as restrictions eased and
despite the surge in infections across the country. However, the
rates of increase have been diminishing over the months, signaling
that the initial strong rebound is losing steam.
The CFNAI is composed of 85 economic indicators drawn from four
broad categories of data: production and income; employment,
unemployment and hours; personal consumption and housing; and
sales, orders and inventories. A positive index reading corresponds
to growth above trend and a negative index reading corresponds to
growth below trend.
In August, two out of four broad categories the index is made up
of contributed positively, but all four categories decreased from
Forty-five of the 85 individual indicators made positive
contributions to the CFNAI in August, while 40 made negative
contributions. Twenty-nine indicators improved in the last month,
while 56 indicators deteriorated, the Chicago Fed said.
The CFNAI diffusion index was also down to 0.62 in August from
0.73 in July. Despite the fall, the reading still signals that
national economic growth is increasing, as it is well above the
minus 0.35 level that historically has been associated with periods
of economic growth.
The index's three-month moving average, the CFNAI-MA3, decreased
to 3.05 from 4.23 in July. Month-to-month movements can be
volatile, as it has occurred during the coronavirus pandemic, so
the indicator provides a more consistent picture of national
economic growth. In line with the diffusion index, the CFNAI-MA3
signals the economy is in expansion territory, as a value above
minus 0.70 has been associated with an increasing likelihood of
For CFNAI August reading, production-related indicators
contributed 0.23 points, down from 1.26 in July, as industrial
production slowed in August compared with the previous month.
Employment-related indicators contributed 0.63 points to the
index, slightly down from 0.65 in July. While nonfarm payrolls
moved up by 1.4 million in August--less than the 1.7 million
registered in July-- the unemployment rate fell by 1.8 percentage
points in the month, more than the 0.9 percentage points decline in
The personal consumption and housing category contributed
negatively, though marginally, to the CFNAI, by minus 0.04 points,
compared with 0.09 points in July, as housing starts decreased in
Sales, orders and inventories category also swung to negative
territory in August, moving down to minus 0.04 from 0.53 the prior
month, the Chicago Fed said.
Write to Xavier Fontdegloria at email@example.com
(END) Dow Jones Newswires
September 21, 2020 08:44 ET (12:44 GMT)
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