Chicago National Activity Index Shows Less Strength Than Expected

The month of July proved less strong than expected based on the national activity index which managed only a 0.13 rise vs Econoday's consensus for 0.38. Production, one of four main components in the report, contributed only 0.05 to the index vs 0.45 in June (a month, however, that was skewed higher by a reversal of supply disruptions in the auto sector following a fire in May at a major auto parts supplier).

Employment, another component, was actually positive in July, contributing 0.12 vs June's 0.03. Sales, orders & inventories contributed 0.03 vs June's 0.06 with personal consumption & housing, reflecting weakness in the former that offset slight improvement in housing, at a negative 0.07 contribution vs minus 0.06 in June.

The slowing in production following a one-time spike in June is distorting the overall reading for July downward, yet the weakness in the personal consumption & housing component is a negative to watch.