U.S. Economy Heated Up in January: Chicago Fed

A key measure of economic activity indicates that the U.S. economy grew above its historical trend in january, the latest sign that the U.S. appears to be defying predictions that its economy would weaken or even fall into a recession this year

The Chicago Fed National Activity Index rose to 0.23 from minus 0.46 in December. Readings above zero are associated with economic growth above the long-term trend, while readings below zero indicate sub-par growth.

This was the first positive reading for the index since it slipped into contraction territory in October of last year. It is the highest reading for the index since registering 0.27 in July.

The index is composed of 85 economic indicators from four broad categories of data: production and income; employment, unemployment, and hours; personal consumption and housing; and sales, orders, and inventories.

Given the strength in retail sales, it is not surprising that the personal consumption and housing indicator made a positive contribution to the index in January. Simiarly, the employment-related indicators pushed the index upward as unemployment fell to 3.4 percent and payrolls soared by more than 500,000.

Production and income indicators also put upward pressure on the index in January. The Federal Reserve’s report on industrial production in January showed output surged one percent.

Business sales, orders, and inventories subtracted from the index for the month. This category has been a drag on the index in four out of the last five months, contributing positively only in December.