Slowdown in Manufacturing Industry and Housing Market Remain Significant
The United States may be headed for an economic slowdown, according to the Federal Reserve Bank of Chicago’s latest report. The study shows that the American economy contracted in August.
The Chicago Fed National Activity Index (CFNAI)—which measures key U.S. economic indicators like production, income, employment, consumption, and housing—posted a drop in August to -0.31, from +0.03 in July.
The CFNAI, which comprises four broad categories of 85 different economic indicators, saw a significant decline in two of the major categories. The “Production and Income” and “Consumption and Housing” categories fell below the trend average. Forty of the 85 indicators worsened from July to August. Just in August, 50 indicators contributed to the index’s drop into negative territory.
Total industrial production fell in August by 0.9%, after posting positive gains in July. Most of this drop is attributable to a decline in the manufacturing industry, particularly the auto industry, which has been suffering from a slowdown in demand this year. Major American automakers have been idling their production capacity in order to avoid an inventory build-up.
Housing and consumption-related indicators also contributed negatively to the index. For example, there was a drop in housing starts in July.
The trend in the CFNAI’s three-month moving average (CFNAI-MA3), which measures a truer picture of the national economic growth, also headed south in August. The CFNAI-MA3, which was zero in July, dropped to -0.04 in August—yet another sign that there has been a slowdown in America’s economic activity.
“Index points to slower economic growth in August,” Federal Reserve Bank of Chicago, September 25, 2017.