U.S. economic growth declined by far more than expected in December, according to an index published Monday by the Federal Reserve Bank of Chicago.
The Chicago Fed National Activity Index plunged to a reading of negative 0.15 in December from 0.44 in November and 0.75 in October.
Economists had forecast the December reading to fall to a positive 0.25, according to Econoday.
The index is compiled each month by the Chicago Fed using 85 indicators of national economic activity. It is constructed to have an average value of zero. A positive index reading indicates growth above trend and a negative reading indicates growth below trend.
A fall in the indicators linked to production led the plunge in the headline index. In November, this contributed a positive 0.25 points to the index. In December, it subtracted 0.13 from the reading. Both manufacturing production and capacity utilization declined as rising Covid-19 infections and quarantining forced workers to stay home and supply-chain problems led to shortages of materials and components.
The group of indicators linked to personal consumption and housing also subtracted from the December reading, coming in at a negative 0.19. That, however, was an improvement from the negative 0.22 reading in November.
Employment indicators added 0.13 to the index a decline from the previous month as job growth slowed to less than half the pace expected.
The contribution of the sales, orders, and inventories category fell from 0.5 in November to 0.03 in December. This likely reflects a decline in consumer purchases in December stemming from the decisions by many households to complete holiday shopping earlier than typical this year in reaction to soaring inflation and supply chain bottlenecks.