August 2017 CFNAI

The Chicago Fed’s National Activity Index (CFNAI) contained evidence of economic slowing in August 2017.  This comprehensive indicator fell from 0.03 (upwardly revised from minus 0.01) to minus 0.31 and now sits at the lowest level since August 2016.  Moe importantly, its three-month moving average dropped to minus 0.04; this is the second time this calendar year it has fallen below zero, suggesting the economy is performing below its recent trend.

The four major categories were mixed with a downward bias.  Production-related components dragged the total down; indicators in this segment of output fell to minus 0.36 from positive 0.03 in July.  Personal consumption and housing were unchanged in the period, remaining at minus 0.06.  Employment managed to contribute positively, adding 0.05 to the total, but they still declined from positive 0.09 a month earlier.  Finally, the sales, orders, and inventories managed to crawl above zero to positive 0.06 from minus 0.04 in July. 

Fifty of the 85 individual components made negative contributions in August; the other 35 were positive.  Forty-five improved in the period, while forty deteriorated.  Of those that improved, 14 still made negative contributions. 

Here is an indicator which is likely being influenced by Hurricane Harvey at the end of August.  This powerful storm hit the nation’s fourth-largest city, so industrial production was likely impacted negatively by the event.  Additionally,  the storm probably hurt personal consumption figures as well.  Even more noise will be included in the September release as Hurricane Irma’s influence begins to filter into the data.  Despite the influence of these powerful exogenous events, it is still worth considering the three-month moving average of the CFNAI, and it is telling us that our economy has decelerated away from its recent growth trend.