Chicago Fed Index Points to Near-Trend U.S. Growth — Evening Brief – 09.21.26

U.S. economic activity slowed slightly in August, according to the Chicago Federal Reserve’s broad monthly activity gauge, as weaker production and softer sales, orders and inventories outweighed modest gains in employment and consumer-related measures.

The Chicago Fed National Activity Index fell to minus 0.04 in August from a revised positive 0.08 in July. The result was modestly stronger than economists’ consensus forecast for minus 0.08, but it marked a reversal from the prior month’s gain. The index is a weighted average of 85 economic indicators covering production, employment, consumption, housing, sales, orders and inventories.

The CFNAI’s three-month moving average increased to positive 0.01 in August from a revised minus 0.01 in July.

The CFNAI Diffusion Index, another three-month average that measures how broadly the index’s underlying indicators are improving, eased to positive 0.02 from a revised positive 0.04.

Thirty-four of the index’s 85 indicators improved in August, while 49 deteriorated and two were unchanged. Of the measures that improved, 11 nevertheless made negative contributions to the overall index.

Production-related indicators subtracted 0.07 point from the August index, compared with a neutral contribution in July. The weakness follows the Federal Reserve’s report that industrial production was unchanged in August and manufacturing output fell 0.3%.

The contribution from sales, orders and inventories fell to zero from positive 0.15 in July, another sign that business and consumer demand momentum moderated.

Employment-related indicators contributed positive 0.01 after subtracting 0.01 in July. Measures tied to personal consumption and housing also improved, contributing positive 0.01 after a negative 0.06 contribution in the previous month.