Chicago Fed Index Increases for 7th Straight Month
The three-month moving average, Chicago Fed National Activity Index-MA3 , improved for the seventh consecutive month (see charts above). At –1.09 in August (up from –1.61 in the previous month), the CFNAI-MA3 suggests that growth in national economic activity was below its historical trend.The production-related indicators made a smaller positive contribution of +0.29 to the index in August compared with +0.45 in July. Industrial production increased 0.8% in August, down slightly from 1.0 percent in the previous month; and manufacturing production increased 0.6 percent in August after rising 1.4 percent in July. July and August marked the first consecutive increases in industrial production since November and December 2007.MP: The Chicago Fed National Activity Index (CFNAI-MA3) has increased in each of the last seven months (February to August), the first period of seven consecutive monthly increases since the December 2001 to June 2002 period following the 2001 recession, see bottom chart above.
5 Comments:
Calculated Risk is reporting this as a decline in activity from July to August. The Chicago Fed is reporting this as a decline with three of four measures in the index deteriorating.
So why is Carpe Diem reporting this as "good news"?
The three-month moving average is actually a trailing average, so this month's rather large decline from negative 0.56 to negative 0.91 is smoothed out by rosier news in the two previous months. It takes an index above POSITIVR 0.2 to indicate the end of a recession. This is going the wrong direction.
If the three-month trailing average increased in August but the August index declined, that only means August was a better month than May but not as good as July.
As long as September isn't better than June (which it surely won't be) the three month average will certainly fall next month. The string of increases is already broken - it just doesn't know it yet.
By the way the 0.2 positive number was a Calculated Risk eyeball estimate of the end of a recession, not a hard and fast rule. Still, the index needs to be in positive territory for a recession to be over. It's going the wrong way this month.
The Chicago Fed National Activity Index increasing appears to be bad. The periods of successive increases is during the recessions. Both the 2001 recession and the 2007-9? recession. It is the break in consecutive increases that appear near the end of the recessions we may want. This is an observation of the graph and nothing deeper.
Today's market action was a clear sign that the rally is for real.
Give us a break, Steve. There's absolutely no way to explain why the broad market does what it does on a particular trading day.
You're sounding like a global warming alarmist who believes there's global warming because today there was a record high temperature somewhere.
Stocks fell for three days straight by the same amount last week and you didn't weep about a global depression. The stock market bubble prior to this recession should convince you forever of the inability to draw conclusions about the economy even from stock market trends, much less daily ticks.
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