December 2017 Chicago Fed National Activity Index

Output accelerated during December 2017 according to data from the Chicago Federal Reserve National Activity Index (CFNAI).  This comprehensive indicator rose to +0.27 from the downwardly revised count of +0.11 (originally +0.15).  Additionally, the three-month moving average held relatively steady at +0.42 versus +0.43 in November, suggesting the economic expansion is not overheated.

Internals were mixed in the period.  Production-related components performed best to end the year, rising to +0.25 after being negative a month earlier.  The sales, orders, and inventories category made a contribution of +0.08, rising slightly from +0.04 a month earlier.  Employment-related figures weakened to +0.01 from +0.12, partially reflecting a slowdown in hiring.  Finally, the personal consumption and housing category dropped to -0.07 from an already weak tally of -0.03 in November.

Slightly more than half of the components made positive contributions.  Forty-three of the 85 indicators added to the CFNAI’s total.  The other 42 subtracted from the tally.  Thirty-seven improved from November to December, while 47 deteriorated and one remained unchanged.  Of those improving, nine still made negative contributions.

December’s report suggests the economy remains in a bit of a sweet spot.  The three-month moving average is comfortably above zero, a level which would indicate things are only moving in line with the trend, but it also remains well below the mark of +0.7 which tends to foreshadow accelerating inflation.  Atlas looks forward to the next iteration of CFNAI because the three-month moving average will no longer include October’s figures which were boosted by hurricane recovery efforts.  January’s tally should provide a more accurate perspective on the state of America’s economy.  Stay tuned