The Chicago Fed's national activity index showed the U.S. economy at below-trend growth for the first time since April last month, and in fact, is suggesting a decline.
Why it matters: In the midst of all the bullishness from economists, CEOs and money managers about 2021's expected breakout growth, the first quarter has been awfully bad based on hard data.
- U.S. retail sales shrank 3% last month.
- Industrial production and capacity utilization dropped 4.2%, with manufacturing output down 3.1% and mining production 5.4% lower.
- The nonfarm payrolls report showed 380,000 jobs added, but "little change" in big-picture trend from December and January's weak numbers.
What it means: The Chicago Fed's index seeks to answer the question, "Is the economy growing at a rate faster than its potential or slower than its potential?" using a weighted average of 85 existing monthly indicators of U.S. economic activity.
- The index is composed of four broad categories of data: production and income; employment, unemployment and hours; personal consumption and housing; and sales, orders and inventories.
- It is constructed to have an average value of zero and a standard deviation of one.
Why you'll hear about this again: February's decline wasn't an aberration. The index saw negative readings for production as well as personal consumption and housing, and all four categories decreased from January.
- The index’s three-month moving average also turned negative last month.