Economic Growth Accelerated in July, Chicago Fed Index Suggests

Federal Reserve Board Chairman Jerome Powell speaks during a news conference in Washington
MANDEL NGAN/AFP via Getty Images

Economic growth in the United States began to recover in July after slumping in the first half of the year, data from the Federal Reserve Bank of Chicago indicated Monday.

The Chicago Fed National Activity Index unexpectedly rose to 0.27 in July after two consecutive months of negative readings. The June reading was revised down from -0.19 to -.25.

Economists polled by Econoday had predicted a -0.19 reading.

The Chicago Fed’s index is designed to measure economic activity across the U.S. It takes into account 85 economic indicators covering four broad categories of economic activity: production and income; employment, unemployment, and hours worked; housing and personal consumption; and sales, orders, and inventories.

Positive readings on the index indicated growth above the historical trend, while negative readings indicate below-trend growth. The negative readings in May and June suggested sluggish growth but not an outright contraction.

 

Production-related indicators contributed a positive 0.16 to the in dex in July, a reversal from –0.19 in June. Manufacturing industrial production increased 0.7 percent in July after decreasing 0.4 percent in June. The contribution of the sales, orders, and inventories category also moved from negative to positive territory, adding 0.01 in July from -0.06 in June.

Employment-related indicators contributed +0.09, up from a neutral value in June, reflecting the decline in unemployment and the blowout jobs number in July. The contribution of the personal consumption and housing category added +0.01 in July from a neutral value in June.

The stronger-than-expected reading indicates that the Federal Reserve may have more work to do to cool off the economy. It suggests that after a few months of sluggishness, the economy has begun to re-accelerate, which could contribute to rising inflation.

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