The Chicago Federal Reserve Bank said that the U.S. economy weakened in January. The National Activity Index (NAI) declined from 0.25 in December to -0.32 in January. Softness in the manufacturing sector contributed to the decrease in the index, with industrial production down 0.4 percent for the month. Other figures which lowered the figure included reduced housing starts and a slightly smaller contribution from employment-related indicators.

One of the unique aspects of the NAI is that it looks at the economy relative to its long-run historical trend, with negative values suggesting that the U.S. economy is growing below its historical average. IN addition, when the 3-month moving average falls below -0.70, the risk of recession is increased.

With these latest figures, the 3-month moving average is 0.30, up from 0.23 last month. This indicates that the national economy continues to grow modestly above its historical trend, even as it is clear (particularly with the January numbers) that there are some persistent weaknesses. Ideally, we would like to see stronger growth moving forward, particularly in the manufacturing sector. But, this will require business leaders feeling more confident about the economic environment than they do right now, with much of the current weakness can be explained by uncertainties related to the political wrangling over the U.S. fiscal situation.

Chad Moutray is chief economist, National Association of Manufacturers.


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