The US economy slowed in April for the second time in as many months, “led by declines in production-related indicators, according to Monday’s release of the Chicago Fed National Activity Index, a weighted average of 85 economic data sets. But the deterioration has yet to make a conspicuous dent in the three-month moving average (CFNAI-MA3), which remained virtually unchanged at -0.04 last month vs. a revised -0.05 for March. The three-month average offers "a more consistent picture of national economic growth," the Chicago Fed advises. By that standard, the US economy is still expanding at a pace that’s only slightly below its historical trend as of last month.
Based on the guidelines published for this index, yesterday’s update also shows that recession risk was low in April. A CFNAI-MA3 value below -0.70 after a period of economic expansion "indicates an increasing likelihood that a recession has begun," according to the Chicago Fed. By that measure, last month remained convincingly in the growth camp. A similar analysis was dispatched in last week’s update of The Capital Spectator Economic Trend & Momentum indices.
For the moment, the expansion stumbles on, although It’s been clear for weeks that the manufacturing sector has wavered recently and that the blowback. It’s still unclear if these headwinds will persist. If they do, the question is whether the broader economy is headed for darker days in the near term? That’s an open debate, as always, but for now it appears that the economy remains on a path of modest growth, albeit at a reduced pace vs. the first quarter.
The next round of updates may tell us if the malaise is spreading and deepening, starting with Tuesday’s report on existing home sales, followed by Thursday’s releases: weekly jobless claims and an early look at the trend in May via the flash estimate of the Markit PMI manufacturing index.