Economy Watch: According to the Chicago Fed, Zero is a Good Number

Zero might not sound good, but not only is it better than June's negative value, it's a lot better than around the beginning of 2009, when the index was nearly minus 4.0.

August 24, 2010
By Dees Stribling, Contributing Editor

Courtesy Flickr Creative Commons user doug.siefken

The Chicago Fed National Activity Index, which dropped in June to minus 0.7 historical average, rose in July to zero–exactly at historic average for the 85 indicators of national economic activity tracked by the index. The four broad categories in the index are production and income; employment and unemployment; personal consumption and housing; and sales, orders and inventory.

Production-related indicators led such economic activity as there was in July. Total industrial activity increased 1 percent in July after edging down 0.1 percent in June, according to the Chicago Fed. In addition, manufacturing production rose 1.1 percent in July after decreasing 0.4 percent during the previous month.

Zero might not sound good, but not only is it better than the June negative value, it’s a lot better than around the beginning of 2009, when the index was nearly minus 4.0. On the other hand, the index’s three-month moving average, known by its alphabet-soup designation of CFNAI-MA3, was lower in July (minus 0.17) than in June (minus 0.12). So the economic outlook is partly cloudy, with a chance of more gloom ahead.

Mortgage Fraud Rears Its Head Again

The Wall Street Journal reported on Monday that data prepared for the newspaper by research specialist CoreLogic suggests that mortgage fraud is making a comeback in the U.S. housing market. CoreLogic examined roughly 7 million home loans and determined that losses from mortgage-related fraud jumped 17 percent in 2009.

Last year, around $14 billion in loans–0.7 percent of all U.S. mortgage loans, according to the newspaper–were originated using bogus application data. That amount is way down from the all-time mortgage fraud peak in 2006, but it’s still a troublesome chunk of the mortgage market.

Back in the mid-2000s, mortgage fraud was often a matter of simple lies that no one checked to obtain “no-doc” loans. Now the art of mortgage fraud requires more finesse, according to the WSJ, but there are still plenty of fraudsters with the requisite talents in forging documents, identity theft and bribing insiders.

Clothing Retailer Faces NYSE Delisting

American Apparel Inc., often described as a “struggling” or “troubled” retailer in news reports, is now facing delisting by the New York Stock Exchange. The company’s deadline to avoid such an action is Nov. 15. It has by then file an already late 10-Q quarterly report with the Securities and Exchange Commission.

The recession finally seems to have caught up with American Apparel, famed for its “social parody” advertising and selling clothes that it makes domestically. Lately shares in the company have been trading for under a dollar–74 cents on Monday, which represents a 76 percent drop in value since the beginning of 2010.

Wall Street started the week in a down mood, but not by much. The Dow Jones Industrial Average dipped 39.21 points, or 0.38 percent, while the S&P 500 lost 0.4 percent and the Nasdaq was down 0.92 percent.