June 2017 Chicago Fed National Activity Index
Submitted by Atlas Indicators Investment Advisors on July 31st, 2017
Economic output improved in June 2017 according to data from the Chicago Federal Reserve’s National Activity Index (CFNAI). The monthly tally reversed some of May’s downward slide of -0.3 percent by increasing +0.13 percent as the year reached the half-way point. Rising to +0.06, the three-month moving average for this comprehensive look at the economy suggests America’s output is running roughly in line with its potential, operating neither too hot nor too cold.
All four broad categories improved in the period, but one still remained negative overall. Aided by industrial output, production related indicators increased to +0.09 in June from -0.16 in May. Sales, orders, and inventories made a contribution of +0.02 after a neutral reading in the prior period. Employment related indicators added +0.06 to the total, up from -0.05 a month earlier. Finally, personal consumption and housing subtracted less from the CFNAI as this group edged up to -0.04 after reaching -0.09 in May.
Fewer than half of its components added to the tally in June. Just 40 of the 85 individual indicators were positive, while 45 subtracted from the total. However, 56 of them improved in the period, while 28 deteriorated and one remained unchanged. Of the indicator that improved, 21 made negative contributions.
In sum, this is an indicator suggesting the economy is operating right in its current sweet spot. In other words, it is running in line with its potential. Of course, many are not satisfied with the nation’s growth level, especially since it has yet to consistently improve at a rate which was typical in previous expansions. CFNAI suggests that our economy’s potential is less than in other periods, since output is tepid but the indicator’s reading is near zero. This resonates with Atlas’ feelings on the matter as we continue to see long-term headwinds for our economy. Structural impediments aside, the good news remains that CFNAI continues to demonstrate the American economy is growing.
