Economy Watch: Chicago Fed Says Economy Still Growing

The Chicago Fed National Activity Index edged down to +0.12 in June from +0.16 in May, according to the Chicago Fed.

The Chicago Fed National Activity Index (CFNAI) edged down to +0.12 in June from +0.16 in May, according to the Chicago Fed on Monday. Still, that positive reading means growth higher than the historic norm. One of the four broad categories of indicators that make up the index was negative for the month (consumption and housing), one neutral (production) and two of the four categories increased from May, especially employment, but also sales, orders and inventories.

The index’s three-month moving average, the ponderously name CFNAI-MA3, decreased to +0.13 in June from +0.28 in May, marking its fourth consecutive reading above zero. June’s CFNAI-MA3 suggests that growth in national economic activity was somewhat above its historical trend. The economic growth reflected in this level of the CFNAI-MA3 also points to low inflationary pressure from economic activity over the coming year, according to the Chicago Fed.

CFNAI and CFNAI-MA3 are put together from 85 individual economic indicators, and they track the health of the U.S. economy fairly closely. Briefly in 2009, CFNAI was almost as low as –4, but in the last four years or so has hovered around zero, or historic norms of growth.

Investors seem nervous

Wall Street dropped on Monday, with the Dow Jones Industrial Average off 48.45 points, or 0.28 percent. The S&P 500 lost 0.23 percent and the Nasdaq was down 0.17 percent. The downward movement seems to be a reaction to continuing crises in other parts of the world.

The CBOE Volatility Index, which is a measurement of investor uncertainty, ended Monday to at 12.81, up 6.22 percent for the day, and was as high as 13.62 during the day. According to the Chicago Board of Options Exchange, the index (nicknamed the “worry index”) gauges market expectations of near-term volatility conveyed by S&P 500 stock index option prices.

As investors worry, they find other places to put their money. On Monday, the price of gold rose 0.3 percent, to $1313.90 per troy oz., on the New York Mercantile Exchange. Meanwhile, yields on 10-year Treasuries dropped to their lowest level in about seven weeks, 2.47 percent. Yields for German securities have also been dropping.