February economic growth near average
The Chicago Fed National Activity Index was 0.03 in February, up from –0.72 in January. The production and income category made a strong positive contribution to the index, which was offset by the negative contributions in the other three broad categories of indicators—employment, consumption and housing, and sales.
The CFNAI is a weighted average of 85 existing monthly indicators of national economic activity. It is constructed to have an average value of zero and a standard deviation of one. Since economic activity tends toward trend growth rate over time, a positive index reading corresponds to growth above trend and a negative index reading corresponds to growth below trend.
With employment, housing and consumption all acting as drags, one has to wonder how long production will be a positive contributor. The 3-month average puts growth at below-trend and continues a slowing process that began in 2004.
Disclosure: author holds put options on Research in Motion (RIMM) at time of publication.