(updates with details, analyst comment)
WASHINGTON (Thomson Financial) - The Chicago Federal Reserve Bank's National
Activity Index for February sent a signal that a recession has probably begun in
the US.
The February reading for the National Activity Index (NAI) fell to -1.04
from -0.68 in January, with all four broad categories in the index negative.
It was the three-month moving average (MA3M) of the index which the Chicago Fed
says created the recession signal.
It was below the -0.70 "threshold" at -0.87 for February, and "such an
occurrence following a period of economic expansion indicates an increasing
likelihood that a recession has begun," the statement said.
Worse still, downward revisions to previous data, especially employment, cut
the previous two months below the -0.70 threshold as well, to -0.73 in January
and -0.78 in December, making three consecutive months of recessionary
indicators.
"Before revision, the index had only flirted with a recession signal but
today's data are more convincing of an outright downturn" said economist Joeff
Hall at Thomson IFR Markets.
"The MA3M was last this low in April 2003, consistent with recent
performance of so many indicators. Heading into the 2001 recession, the MA3M had
been -1.15 in March and it was 1.42 in November, the last business cycle
trough."
The February three-month moving average also "indicates low inflationary
pressures from economic activity over the coming year."
The Chicago Fed's NAI is a weighted average of 85 national indicators of
economic activity in four categories: production and income, employment,
personal consumption and housing, and sales, orders and inventories.
In February, the production indicators contributed -0.39 to the total index,
compared with -0.12 in January. Employment indicators worsened to -0.36 from
-0.27. Consumption and housing were marginally less negative at -0.22 from
-0.24.
Sales, orders and inventories were -0.08 last month, the Chicago Fed said.
Sixty-five of the 85 national indicators were negative in February, and just
20 made positive contributions.
dennis.moore@thomson.com+tfn.newsdesk@thomson.com
dem/cmr/dem/wash/cmr
COPYRIGHT
Copyright Thomson Financial News Limited 2007. All rights reserved.
The copying, republication or redistribution of Thomson Financial News Content,
including by framing or similar means, is expressly prohibited without the prior
written consent of Thomson Financial News.
|