U.S. Economic Growth Revamped in October, the Chicago Fed Says
The U.S. economy gained momentum in October following sluggish growth in the last few months, according to an index compiled by the Federal Reserve Bank of Chicago released Monday.
The Chicago Fed National Activity Index rose to 0.76 in October from minus 0.18 in September, topping the 0.17 consensus forecast from economists polled by FactSet.
The CFNAI index is composed of 85 economic indicators drawn from four broad categories of data: production and income; employment, unemployment and hours; personal consumption and housing; and sales, orders and inventories. A positive reading signals growth above historical trend, while a negative reading corresponds to growth below trend.
In October, the indicator points to a pickup in economic growth as it signals an acceleration compared with the prior two months.
All four broad categories of indicators used to construct the index made positive contributions to it in October, and all four categories improved from the prior month, the Chicago Fed said.
The rise in the headline index was driven by the improvement in production-related indicators, which contributed 0.44 points to the index following a contribution of minus 0.35 points the previous month.
The rebound reflects improving industrial production data, which expanded by 1.6% in October after falling 1.3% in September.
The contribution of the employment, unemployment and hours category to the CFNAI increased to 0.24 points from 0.16 points the previous month, mainly due to an acceleration in the creation of nonfarm payrolls to 531,000 in October.
The contribution of the sales, orders and inventories category edged up to 0.05 points in October from 0.01 points in September.
The personal consumption and housing category contributed 0.03 points to the index, up from 0.01 points the prior month.
The CFNAI diffusion index rose to 0.17 in October from 0.14 in September, while the index’s three-month moving average, the CFNAI-MA3, decreased slightly to 0.21 points from 0.22 the prior month. Both the diffusion index and the CFNAI-MA3 suggest that the U.S. economy is expanding at a moderate pace.
U.S. economic growth is expected to rebound strongly in the last three months of the year after slowing over the third quarter. Rising Covid-19 cases could lead to localized slowdown in activity, but current data signal that this shouldn’t change an improving picture for the overall national economy, economists say.
Source: Dow Jones