March 2018 Chicago Fed National Activity Index
Submitted by Atlas Indicators Investment Advisors on April 30th, 2018
After a strong uptick in February, the Chicago Fed National Activity Index took a bit of a breather in March 2018. This indicator, which looks at 85 components, decelerated to +0.10 versus +0.98. Adding to the tepid tone of the release, the three-month moving average slowed to +0.27 from +0.31 a month earlier.
Three of the four major categories decreased from February, and just two of the four made positive contributions to the index. Production-related indicators tacked on +0.14 after adding +0.54 in the middle of the first quarter; industrial production improved just 0.5 percent after increasing 1.1 percent in the prior period. The sales, orders, and inventories segment of the release contributed just +0.04 after giving more generously (+0.14) in February. Employment-related indicators subtracted from the total (minus 0.07) following a strong showing (+0.35) in the previous month; as you may recall, payroll gains slowed considerably in March (+103,000) versus February (+326,000). Finally, personal consumption and housing were less negative, improving to minus 0.01 in March from minus 0.06 in February.
Also included in this release is a diffusion index for the CFNAI; it considers how components have changed over the past three months. It also edged down, falling to +0.18 from +0.20. During the first quarter of 2018, forty-four of the 85 components made positive contributions, while 41 were negative. Just 25 improved in the period, while 59 deteriorated, and one was unchanged. Of the components which improved, nine made negative contributions nonetheless.
This iteration of CFNAI is less than optimal. Atlas will watch this indicator as the new quarter gets underway. If economic deceleration is occurring, it should show up in this release from the Chicago Fed. However, let us keep in mind that slowing is not the same as contraction (a.k.a. recession). This comprehensive look at the American economy is far from signaling any worrisome issues regarding output.
