Chicago Fed National Activity Index Dec 2018

Tracking economic output has been difficult lately since so many indicators are measured by various government entities.  Even though the government shutdown is over, there are large gaps in data. Fortunately, the Chicago Fed produces their eponymously named national activity index (CFNAI) which is not dependent on federal funding, so we have some sense of the robustness of America’s economy during December 2018.

This collection of 85 indicators improved to end last year.  The monthly tally accelerated to 0.27 from 0.21 in November.  Adding to the good news, the three-month moving average managed to rise as well, increasing to 0.16 from 0.12; this average is used as a forecasting tool for recessions by the Chicago Fed, and it is far from signaling a contraction despite worries from an increasing number of pundits.

Notwithstanding the rising headline and averages, the details within the report were mixed.  Production-related indicators moved up sharply to 0.22 from 0.02, led by manufacturing industrial production.  Employment-related indicators contributed 0.11 to the indicator, rising marginally from 0.10 in November.  The sales, orders, and inventories categories were unchanged, down from rising 0.12 a month earlier.  Finally, personal consumption and housing dropped to minus 0.06 from minus 0.03.

While the overall indicator improved, this month’s release should come with an asterisk.  You see, the Chicago Fed ran into the same issue that Atlas has encountered: the government shutdown.  They had to estimate forty of the eighty-five components.  This could create some problems for the next several months because incomplete data will be used to calculate the three-month moving average until the March report which will get reported in April of this year.  And if the shutdown resumes later this month, it only lengthens the amount of uncertainty in our nation’s output.