The national economy took an upturn in February, according to the Chicago Fed's latest National Activity Index. Released Monday, the CFNAI—which measures 85 economic markers—for February landed at 0.88. That's 0.02 above January numbers. The news, however, wasn't as good when it came to the housing sector.
That 0.02 difference is actually a bigger difference than it might seem. The CFNAI is weighted so that 0 represents average growth. Anything above 0 represents above-average growth. Also, at 0.88, the February CFNAI is the second-highest it's been over the past 11 years. Only last October's 0.90 index was higher. The index's six-month average was 0.435, the highest number in 12 years, and indicative of more overall economic stability, according to the Chicago Fed.
All four broad categories of indicators that make up the index increased from January, and three of the four categories made positive contributions to the index in February. Sixty-one indicators improved from January to February, while 23 indicators deteriorated, and one was unchanged. Consumption indicators improved, on balance, pushing up the category’s overall contribution.
Of the indicators that improved, nine made negative contributions. Housing was one of them. According to the Chicago Fed, housing starts decreased from 1.3 million annualized units in January to 1.2 million in February.
The latest S&P CoreLogic Case-Shiller Home Price Index released Tuesday showed a 6.4 percent year-over-year growth in home prices among the Index’s 20-City Composite. Those increasing prices are being spurred on by inventory shortages and low vacancy rates among owner-occupied houses. “First-time home buyers will continue to struggle to find homes within their price range as prices climb higher amid low inventory,” said Cheryl Young, Senior Economist at Trulia. The Chicago Fed’s data showing housing starts continuing to decline likely won’t help with the inventory or affordability problems.
The February CFNAI shows that, over the past six months, the national trend has been a steadily improving economy. Generally, the economy has been improving or at least holding strong since March 2016. The index’s three-month moving average, CFNAI-MA3, increased to 0.37 in February from 0.16 in January.
February's numbers were led by improvements in production-related indicators, the Chicago Fed reported. Production-related indicators contributed 0.50 to the CFNAI in February, up from -0.15 in January. The CFNAI Diffusion Index, which is also a three-month moving average, moved up to 0.28 in February from 0.16 in January. Overall, according to the index, 63 of the 85 markers showed improvement over January.
Though still in the red, the contribution of the personal consumption and housing category moved up to –0.02 in February from –0.10 in January.
Employment-related indicators contributed +0.31 to the CFNAI in February, up from 0.24 in January. Nonfarm payrolls increased by 313,000 in February, after increasing by 239,000 in January.
Total industrial production increased 1.1 percent in February after decreasing 0.3 percent in January. The sales, orders, and inventories category contributed 0.09 to the CFNAI in February, up from 0.03 in January. The Institute for Supply Management’s Manufacturing Inventories Index increased to 56.7 in February from 52.3 in the previous month.