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US economic activity improves slightly in September: Chicago Fed

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US economic activity improves slightly in September: Chicago Fed

Economic activity in the United States expanded slightly in September, according to the Chicago Federal Reserve. The National Activity Index increased 0.1 percentage point to +0.14, shifting the three-month moving average to -0.03.

The National Activity Index captures economic activity across 85 indicators from four broad categories: production/income, employment, personal consumption and housing and sales/inventories. A value of zero indicates the national economy is expanding at its historical growth rate; positive values indicate above-average growth, and negative values suggest economic activity is expanding at a slower pace than the historical average.

In total, 47 of the 85 individual indicators were positive, and 42 indicators improved from the previous month. Gains were led by production-related factors. The production category contributed +0.19 to the index, up from +0.17 the previous month. Industrial production advanced 0.2 percentage points to 0.6 percent, while manufacturing production increased 0.1 percentage point to 0.5 percent. Employment-related indicators contributed +0.08 in September, unchanged from the previous month.

Sales, orders and inventories contributed +0.05 to the indicator, up from +0.04 the previous month. The contribution of consumption and housing declined. Consumer spending continues to be restrained, as American households struggle with rising fuel costs, tax hikes and a shaky job market. The housing sector has also cooled, as high mortgage rates have kept would-be buyers out of the market.

The data show the US economy maintained its recovery pace leading up to the federal government shutdown. Economists were concerned activity would slow leading up to the shutdown, which resulted in the loss of $24 billion to the US economy. Although the economy expanded 2.8 percent in the third quarter, consumer spending and business investment waned. However, job growth during the shutdown exceeded expectations, as employers remained positive about their business prospects leading up to the final quarter of 2013.

The September report reassures the market the US economy remained positive in the final month of Q3. Although economic activity is expected to have waned leading up to the government shutdown, the economy continued to grow faster than the historic average.

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