October 2018 Chicago Fed National Activity Index

Economic output increased slightly in October 2018 according to the Chicago Fed National Activity Index (CFNAI).  Their indicator with 85 components edged up to +0.24 from +0.14 in September.  Additionally, the three-month moving average increased marginally, rising to +0.31 from +0.30 which suggests a continued upward trajectory for the U.S. economy. 

Most of the indicators improved in the period.  Fifty-one of the 85 components were higher compared to a month earlier.  Just 33 deteriorated and one was unchanged.  Of those improving, 17 made negative contributions. 

After just one of the four major categories improved a month earlier, three of the four improved to start the fourth quarter.  Production-related indicators contributed +0.06, slowing from an uptick of +0.09 after industrial production decelerated.  The sales, orders, and inventories category was unchanged at +0.04.  Employment-related indicators added +0.19 to the CFNAI, rising from +0.05 in September; accelerating nonfarm payrolls in the period helped.  Only the personal consumption and housing category subtracted from the total, further decelerating to -0.05 from -0.04 a month earlier.

This indicator is on Atlas’ must watch list because its recent trend has been weaker.  Fortunately, October’s uptick provided some relief.  Housing and consumption are still concerning since consumption is a primary driver of the American economy, and housing tends to move with the contours of the business cycle.  One month’s improvement is not enough to signal the all clear, but it is a step in the right direction.