Chicago Fed economic measure cools in March from February’s nearly two-decade high

As factory output and hiring slowed, March index eased to 0.10 from February’s 0.98
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A measure of the U.S. economy from the Chicago Federal Reserve cooled in March from an upwardly revised, multiyear-high February reading as weaker hiring within a still-strong job market pushed down the broader index. The Chicago Fed’s index of national economic activity was a positive 0.10 last month, down from the upwardly revised positive 0.98 in February. February’s result was the highest marker for this volatile index since positive 1.19 in October 1999, according to the St. Louis Fed’s FRED database.. The index’s less-volatile, three-month moving average registered a positive 0.18 last month, down slightly from 0.20 in February.

U.S. stocks  showed little reaction to Monday’s economic data, maintaining their downward slant as market attention fixed on rising Treasury yields. The Chicago Fed index is a weighted average of 85 economic indicators, designed so that zero represents trend growth and a three-month average below negative 0.70 suggests a recession has begun. Forty-four of the 85 individual indicators made positive contributions to the index in March, while 41 made negative contributions. Production-related indicators, meaning factories, contributed positive 0.14 to the index in March, down from positive 0.54 in February. Other Fed data had shown that total industrial production increased 0.5% in March after increasing a much stronger 1.1% in February and, separately, the new orders component of the Institute for Supply Management’s manufacturing index decreased to 61.9% in March from 64.2% in the previous month. Employment-related indicators contributed a negative 0.07 in March, a marked reversal from their positive 0.35 boost to February. As Labor Department data showed earlier this month, nonfarm payrolls increased by 103,000 in March after increasing by 326,000 in February. Meanwhile, the contribution of the personal consumption and housing category improved slightly but was still at negative 0.01 last month. Housing starts increased to 1.32 million annualized units in March from 1.3 million in February, and housing permits increased to 1.35 million annualized units in March from 1.32 million in the previous month, government data showed. Financial markets get a look at the broader economy with this week’s release of GDP data. The economy likely decelerated to a growth rate of about 2% from a more robust pace of 2.9%, 3.2% and 3.1% in the prior three quarters, according to a MarketWatch survey. The expected slowdown is not a shocker. It’s happened repeatedly over the past decade and a half; growth starts out slow and then speeds up during the rest of the year.