By Xavier Fontdegloria
The U.S. economy grew above-average in July, picking up speed compared with the previous month, data from the Federal Reserve Bank of Chicago showed Monday.
The Chicago Fed National Activity Index rose to 0.53 in July from minus 0.01 in June, above the 0.15 consensus by economists polled by FactSet.
The CFNAI index is composed of 85 economic indicators drawn from four broad categories of data: production and income; employment, unemployment and hours; personal consumption and housing; and sales, orders and inventories. A positive index reading corresponds to growth above trend and a negative index reading corresponds to growth below trend.
The CFNAI reading in July suggests an acceleration of economic activity in the month. However, the peak of the economic recovery from the pandemic was likely reached in the second quarter of the year, economists say.
Three of the four broad categories of indicators used to construct the index made positive contributions to it in July, and three categories improved from the prior month, the Chicago Fed said.
Production-related indicators contributed by 0.38 to the CFNAI, up from minus 0.09 in June, as manufacturing production rose 1.4% in July after decreasing 0.3% the previous month.
The contribution of the employment, unemployment and hours category to the CFNAI rose to 0.30 in July from 0.14 in June. The unemployment rate decreased to 5.4% in July from 5.9% in June, and nonfarm payrolls rose by 943,000 in July after increasing by 938,000 in the previous month.
The contribution of the sales, orders and inventories category to the CFNAI increased to 0.02 in July from minus 0.06 in June.
The personal consumption and housing category contributed negatively to the index, by minus 0.15, down from 0.01 in June, as personal consumption indicators broadly deteriorated compared with the previous month.
The CFNAI diffusion index increased to 0.28 in July from 0.05 in June, while the index's three-month moving average, the CFNAI-MA3, rose to 0.23 in July from 0.01 in June. Month-to-month movements can be volatile, so the indicator provides a more consistent picture of national economic growth. Both the diffusion index and the CFNAI-MA3 signal that the U.S. economy is in expansion territory.
Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com
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August 23, 2021 at 07:30PM
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U.S. Economic Activity Accelerated in July -- Chicago Fed - MarketWatch
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