The Chicago Federal Reserve’s National Economic Activity Index revealed that Hurricane Sandy slowed the economy in October.
On Monday, the Chicago Federal Reserve released its National Economic Activity Index for October. The report disclosed that Hurricane Sandy negatively affected industrial production, although the index has been negative for six of the past eight months. The CFNAI is a weighted average of 85 indicators of national economic activity. A positive index reading corresponds to growth above trend and a negative index reading corresponds to growth below trend. Chicago Fed: Economic Activity Slower in October
From the report:
Led by declines in production-related indicators, the Chicago Fed National Activity Index (CFNAI) decreased to –0.56 in October from 0.00 in September. All four broad categories of indicators that make up the index decreased from September, and only two made positive contributions to the index in October.
The index’s three-month moving average, CFNAI-MA3, decreased from –0.36 in September to –0.56 in October – its eighth consecutive reading below zero. October’s CFNAI-MA3 suggests that growth in national economic activity was below its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year.
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Production-related indicators contributed -0.45 to the CFNAI in October, down from -0.06 in September. Hurricane Sandy negatively affected industrial production in October. Manufacturing production decreased 0.9 percent in October after increasing 0.1 percent in September, and manufacturing capacity utilization declined to 75.9 percent in October from 76.7 percent in the previous month.
Also on Monday, the Dallas Fed released its Texas Manufacturing Outlook Survey for November. The general business activity index came in at negative 2.8, which was far below expectations of positive 4.7. 2013: The Wildest Ride of Our Lifetime!
From the report:
Texas factory activity was little changed in November, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, came in at 1.7, indicating output barely increased from October.
Other survey measures suggested flat manufacturing activity in November. The new orders index came in at 0.4, suggesting that demand was unchanged from October. The capacity utilization index plunged more than ten points, coming in at -1.3, indicating utilization rates were little changed from last month. The shipments index edged down from 4.7 to 0.9, with more than half of the respondents noting no change from October.
Perceptions of broader business conditions worsened in November. The general business activity index fell to -2.8, returning to negative territory. The company outlook index moved down to -4.8, registering its first negative reading since April.
The major ETFs expected to respond to the Chicago Federal Reserve’s National Economic Activity Index are:
Industrial Select Sector SPDR ETF (NYSEARCA:XLI) -0.05%
Materials Select Sector SPDR ETF (NYSEARCA:XLB) -0.19%
iShares Dow Jones US Industrial Sector Index Fund (NYSEARCA:IYJ) +0.01%
Consumer Staples Select Sector SPDR Fund ETF (NYSEARCA:XLP) -0.87%
iShares Dow Jones US Financial ETF (NYSEARCA:IYF) -0.58%
Bottom line: Both the Chicago Federal Reserve’s National Economic Activity Index and the Dallas Fed’s Texas Manufacturing Outlook survey revealed slowing economic growth, underscoring the fact that the economy is recovering at an anemic pace.