January 2018 Chicago Fed National Activity Index
Submitted by Atlas Indicators Investment Advisors on March 5th, 2018
America’s economy was relatively steady in January 2018 according to the latest Chicago Fed National Activity Index (CFNAI). This reading slowed to 0.12 from the downwardly revised count of 0.14 (originally 0.27). Since monthly changes can vary widely at times, it is constructive to watch CNFAI’s three-month average which currently suggests the same thing as others to which Atlas pays attention: output is positive but decelerating.
Internals were mixed in the period. Production-related indicators fell to minus 0.01, a sharp drop from +0.11 in December; slowing industrial output led this decline. Personal consumption and housing edged higher but remained negative (rising to minus 0.03 from minus 0.05); while not optimal, it is an improvement. The sales, orders, and inventories category remained positive but dropped to 0.07 from 0.09 a month earlier. Finally, employment made a comeback in the period, rising to 0.09 (reflecting the strong monthly gain in net jobs during January) after reaching minus 0.02 at the end of last year.
A deteriorating number of components made positive contributions to start 2018. Of its 85 components, just 40 added to the index. The other 45 were negative. Thirty-seven components improved from December to January, while 47 deteriorated and one was unchanged. Of the improving indicators, 15 still made negative contributions to the total.
Our last CFNAI note suggested the economy could have been in a bit of a sweet spot (accelerating but not overheating), but now it looks like the rate of change is slower. The three-month moving average retreated much closer to zero than last go around (+0.17 vs. +0.43), so output is probably not moving forward as quickly as before. Atlas will be watching this moving trend in the months ahead because it should tell us when reacceleration begins or if a continued slowing is occurring.
