Data from the Chicago Federal Reserve shows that the U.S. economy continued to expand in July, though at a slower pace than in June, suggesting a trend of slower but still above-average economic growth as the country continues its fitful rebound from the lows of the CCP virus fallout.
The Chicago Fed National Activity Index (CFNAI) came in at 1.18 in July, down from 5.33 in June, according to an Aug. 24 release. Economists polled by FactSet expected the index to register a substantially higher value of 4.0, so the Feds figures are a surprise to the downside.
Still, since a positive index reading reflects growth above trend, while a negative reading corresponds to growth below trend, the current number of 1.18 suggests slower “but still well-above-average growth,” the Fed stated.
Positive contributions to the index were made by production-related indicators, including in manufacturing.
“Its not surprising to see a pickup in manufacturing as the economy has started to reopen, even though pockets of the country have pulled back on their reopenings,” said Lindsey Bell, chief investment strategist at Ally Invest. “Its an encouraging sign and it supports the upside we have seen in the markets.”
Separate IHS Markit survey reports released last week showed that in August, U.S. business activity snapped back to its highest levels since early 2019, as companies in both manufacturing and services sectors saw a resurgence in new orders.
Personal consumption and housing also made positive contributions to the Fed index, but only slightly, dropping from 0.42 in June down to 0.02 in July. Personal consumption contributes around 70 percent to U.S. gross domestic product (GDP).
Last weeks home sales data for July showed deals rising at a record pace for the second straight month, providing another glimmer of growth in Americas economy.
Employment-related indicators contributed 0.38 points to the Fed index in July, down from 1.94 in June. This reflects a possibly weakening trend in the labor market, in line with recent nonfarm payroll and jobless data, which shows that the economy added 1.8 million jobs in July after adding a record 4.8 million in June, while the unemployment rate fell by 0.9 percentage points in July after falling by 2.2 percentage points in June.
Last week also brought a Labor Department announcement of a steep rise in U.S. jobless claims, while Federal Reserve minutes released on Wednesday showed officials worried that the CCP (Chinese Communist Party) virus would continue to be a drag on the economy.
Fed officials said that “prospects fRead More – Source