By Xavier Fontdegloria
The U.S. economy gained steam in December compared with the previous month, driven by an acceleration of production-related indicators, data from the Federal Reserve Bank of Chicago showed Monday.
The Chicago Fed National Activity Index came in at 0.52 in December, up from 0.31 in November and pointing to an uptick in economic growth in the month. The figure is above economists' consensus, who polled by FactSet expected the indicator to be at 0.10.
The CFNAI index is composed of 85 economic indicators drawn from four broad categories of data: production and income; employment, unemployment and hours; personal consumption and housing; and sales, orders and inventories. A positive index reading corresponds to growth above trend and a negative index reading corresponds to growth below trend.
The increase of the index in December comes after it registered a decline in November amid the resurgence of Covid-19 across the country.
Three of the four broad categories of indicators used to construct the index made positive contributions to it in December, but three of the four categories decreased from the prior month, the Chicago Fed said.
Fifty-three of the 85 individual indicators made positive contributions to the CFNAI in December, while 32 made negative contributions. Forty-five indicators improved from November to December, while 40 indicators deteriorated.
Production-related indicators drove the uptick of the headline index, contributing 0.44 points to the CFNAI in December, up from 0.13 in November. Industrial production rose 1.6% in December after increasing 0.5% in November.
Employment-related indicators contributed 0.13 points to the CFNAI in December, down slightly from 0.15 in November, as nonfarm payrolls fell by 95,000 in December after rising by 417,000 the prior month.
Consumption indicators weakened, pushing down the category's overall contribution in December. The personal consumption and housing category decreased to minus 0.09 from minus 0.06 the prior month, the data showed.
Sales, orders and inventories category also moved down, contributing 0.05 points in December from 0.09 points the prior month.
The CFNAI diffusion index was down marginally to 0.54 in December from 0.55 in November. The reading signals that national economic growth is increasing, as it is above the minus 0.35 level that historically has been associated with periods of economic growth.
The index's three-month moving average, the CFNAI-MA3, increased to 0.61 in December from 0.59 in November. Month-to-month movements can be volatile, so the indicator provides a more consistent picture of national economic growth. In line with the diffusion index, the CFNAI-MA3 signals the economy is in expansion territory, as a value above minus 0.70 has been associated with an increasing likelihood of economic growth.
Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com
(END) Dow Jones Newswires
01-25-21 0844ET
