Summarizing many of the publicly available data sets, the Chicago Federal Reserve Bank’s National Activity Index moved slightly higher from -0.55 in May to -0.46 in June. The index remained negative for the third month in a row, reflecting continued weakness in the national economy.
This index is distinctive in that a recession is deemed more likely when the three-month moving average moves below -0.70. The current three-month moving average is -0.60, which is too close for comfort, mainly due to a large contraction in April. Fortunately, the index is moving in the right direction now, albeit still in negative territory.
One of the strongest contributors to the index was the Institute for Supply Management’s Purchasing Managers Index, which rose in June, helping to lift the sales, orders and inventories category. Improvements in industrial production and housing starts also helped to lift the index for the month. Employment, however, had a negative influence, with weak nonfarm payroll growth and a rising unemployment rate.
Chad Moutray is chief economist, National Association of Manufacturers.