Skip to content

What’s Holding the Economy Back, in Five Charts

Throughout much of the later part of this year, our Bob Hughes has been saying the economy’s trajectory has been one of slow and steady growth. This morning, we have more evidence that this is the case.

In the last few months, there have been moments of panic, and days of euphoria. But Hughes, senior research fellow at the American Institute for Economic Research, said the Chicago Fed National Activity Index is a good way to look at the big picture, and take a clear-eyed look at the economy’s trend.

Hughes said the Chicago Fed index is useful because it takes into account 85 monthly indicators, which gives a broad picture of the economy. The November edition, which came out this morning, registered at -0.3, showing that the economy is growing at just below its long-term trend (on the chart, zero represents trend growth in the economy). It’s down from October, which was -0.17.

The index splits its indicators into four main groups, and when you look at them that way, it’s easier to see what’s holding the economy back from more robust growth, Hughes said. The first group, personal consumption and housing, is still making its way back from the recessionary lows of a few years back:

The second group, employment, unemployment and hours, reflects some of the good news we’ve received in recent weeks.

The third group, production and income, shows where much of the sluggishness has been lately: low energy production and investment, and a manufacturing sector that has been held back by the slow global economy.

Finally, the category of sales, orders and inventories is more or less on trend.

Hughes underscored that the economy is still growing. It’s just that it’s been a little slower than the long-term trend lately.

“Any individual indicator can show a very strong reading or a very weak reading for any one month. This is a nice comprehensive way to look at it,” Hughes said.

Click here to sign up for the Daily Economy weekly digest!

2 Comments Post a comment
  1. This analysis is actually quite useful. What holds back personal consumption and housing? Maybe legacy debt, unrestructured. Student loans, pre-2008 mortgage debt, credit card rates pre-2008 never reduced enough to make a difference today, the new 6-year car loans offered by the dealers, etc. Walker Todd, Chagrin Falls, OH

    Like

    December 21, 2015
  2. Aaron Nathans, Communications & Public Affairs Manager #

    Thanks, Walker.

    Like

    December 22, 2015

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: