Chicago Fed National Activity Index Falls Off Cliff in October

U.S. economic growth slumped in October, a key barometer from the Federal Reserve Bank of Chicago showed Tuesday.

The Chicago Fed National Activity Index, which tracks overall economic activity in the U.S., fell to minus 0.49 percent from a revised minus 0.02 in September. Every category of indicators tracked by the index registered a decline.

Readings below zero suggest the economy is growing at a slower rate than its historical trend. The index climbed above zero in July to 0.18, the best level since January, suggesting that growth was accelerating. The August and September readings were slightly below zero, suggesting a slowdown from the fast start of the third quarter.

The sharp decline in October indicates the slowdown continued and worsened as the fourth quarter began.

The index is composed of 86 economic indicators that fall into four broad buckets: production and income; employment, unemployment, and hours; personal consumption and housing; and sales, orders, and inventories.

The production factors were the biggest drag in October, falling to minus 0.33 from minus 0.4 in September. Employment, which has been a key source of strength for the economy, swung from a positive reading to a negative one.

Sales, orders, and inventories, which had been neutral, came in negative. Personal consumption and housing also went from neutral to negative.

Twenty-seven indicators improved from September to October, while 58 indicators worsened.

The index’s three-month moving average fell to –0.22 in October from a neutral value in September.
Despite the decline, the index remains above the level that historically marks the difference between growth and contraction. Most economists now say they no longer expect a recession next year.

The CFNAI Diffusion Index, a three-month moving average gauge that tracks the degree to which a change in the monthly index is spread out among its 85 indicators, fell to  minus 0.20 in October from +0.08 in September.