The Chicago Federal Reserve Bank reported that growth in the U.S. economy expanded robustly in October for the second straight month, rebounding from softness in both July and August. The National Activity Index (NAI) increased from 0.36 in September to 0.65 in October, its highest level since January 2012.
The data have been highly volatile year to date, but the strong growth in the last two months has been encouraging, even if much of the current gain was likely a hurricane-related bounce back. The three-month moving average was also higher, up from 0.01 in September to 0.28 in October, a level not seen since May 2014. Index readings below zero suggest the economy is growing below its historical trend, with positive readings indicating the opposite.
In October, production-related indicators added 0.53 to the headline index, with manufacturing production jumping 1.3 percent in the month. Employment and sales were also positive contributors to the NAI, with 261,000 nonfarm payroll workers added in October and the unemployment rate falling to 4.1 percent, its lowest point since December 2000. Manufacturers hired 24,000 employees in October, with 13,800 additional net new workers per month on average year-to-date. Housing provided a small negative drag to the NAI—mainly because the residential construction market remains below its historical trend—but the most recent starts and permits figures were promising, and builders remain upbeat in their overall outlook.