Chicago Fed Index Falls to Lowest in More Than 4 Years

An economic activity index calculated by the Federal Reserve Bank of Chicago showed its lowest level in more than four years in Dec., dragged down by a sharp contraction in employment-related indicators, the bank said recently. The three-month moving average of the Chicago Fed's national activity index was -0.67, as the single-month reading for Dec. fell to -0.91 from -0.29 in Nov. The 3-month average, which the Chicago Fed says provides a more consistent picture of national economic growth than the volatile monthly readings, hit its lowest level since May 2003, when it was -0.74. The Dec. three-month average surpassed the -0.66 reading at the end of Oct. The three-month average was below zero for every month in 2007, indicating below-average economic growth throughout the year. The data are in line with other recent indicators of economic weakness that have caused financial markets to swoon and led to several interest rate cuts by the Federal Reserve. In Dec., each of the four broad categories in the Chicago Fed Index was negative, with employment-related indicators at -0.43. The Dec. figure fell from -0.10 in Nov. as the unemployment rate rose to 5% last month from 4.7% the month before, the Chicago Fed noted in a press release. The consumption and housing category of indicators came in at -0.26 in Dec., after a reading of -0.14 in Nov. The Chicago Fed pointed out that housing starts were down 14.2% in Dec. while housing permits fell by 8.1%. The production-related category of the index had a reading of -0.18 in Dec. vs. -0.01 in Nov., while the sales, orders and inventories category was -0.05, equivalent to the previous month's reading.