National Activity Index Far Higher Than Expected

The national activity index shot to a far higher-than-expected 0.65 in October with the 3-month average moving from flat to 0.28. The latest level is an expansion high and the 3-month average is near one, both pointing to economic growth that is significantly stronger than average.

But behind the strength are September and October hurricane reversals from August's Texas hit by Harvey. Industrial production fell sharply in August then rebounded in September and then rebounded very strongly in October. The report's three other components are steady with both employment and sales, orders & inventories making slightly smaller contributions and with personal consumption & housing pulling down growth slightly more.

Putting production aside, this report continues to run at a modest pace. But indications from the factory sector have been increasingly promising and do hint at production-driven acceleration for fourth-quarter growth.

Recent History Of This Indicator:
The big jump in both industrial production and payroll growth will be key positives for the national activity index where Econoday's consensus is plus 0.20 vs September's 0.17 rise. This index has been soft, underperforming what has been a solid year for economic growth.