A key gauge of economic activity indicated that economic growth accelerated in September, defying forecasts by Wall Street economists and Federal Reserve officials that the pace of the economy would slow toward the end of this year.
The Federal Reserve Bank of Chicago said Monday that its National Activity Index rose to 00.2 in September, up from a downwardly revised -0.22 reading in August.
Readings above zero indicate the economy is expanding faster than is historical trend.
The index is built on 85 economic indicators covering four broad categories of business activity: production and income; employment, unemployment, and hours workers; personal consumption and housing; and sales, orders, and inventories.
All four categories showed improvement in September. The production and employment indicators swung to positive readings for the month. The sales, orders, and inventories category improved toward a neutral reading from last month’s negative score. The personal consumption and housing category also moved toward neutral from negative.
The Chicago Fed also calculates a diffusion index based on how widely spread a month’s change is among the indicators. This rose to a positive reading of 0.5 from minus 0.15 in August. This suggests the acceleration was broad-based.
The consensus among economists is now that the U.S. is likely to avoid a recession next year. This prediction, however, turns on the idea that the economy will slowdown next year, growing only very slowly. Fed officials said in speeches during the last two weeks that they believe the economy is slowing, although much of the economic data suggests otherwise.