Data released Monday morning signaled that an underperforming U.S. economy got worse in January, hit by production-related weakness.
According to a gauge of the national economy from the Federal Reserve Bank of Chicago, activity in January posted below-average growth for a second month, hitting negative 0.39, the lowest result in six months. The gauge takes 85 economic indicators into account, covering areas such as production, jobs and consumer spending. Negative values signal a below-average rate of economic growth, a zero reading means that the economy is growing at its historical trend rate, and positive values signal faster-than-average growth.
While the monthly data can be volatile, a trend for the Chicago Fed’s gauge also shows weakening. The three-month moving average was 0.1 in January, the lowest result in four months. But don’t worry about a contracting economy yet. The average in January was above a key reading of negative 0.7. Once the average drops below negative 0.7 following a period of growth, then the chances are higher that a recession has started, according to the Chicago Fed.
News of a faltering economy will sound familiar to those who followed reports in recent weeks that signaled a sputtering housing market, and weakness for retail sales and manufacturing. Elsewhere Monday, a February gauge of the U.S. service sector hit the lowest level in four months, with slower growth for jobs.
An unusually tough winter may be behind some of the recent economic weakness, but there could be other factors as well. Take the housing market, for example, which has also faced new mortgage rules, weak jobs growth and dropping affordability.
But there may be a silver lining for those feeling overwhelmed by a flurry of weak reports: Chunks of activity delayed by the cold weather could show up in coming months. Indeed, a recent report forecasting national growth indicated that the economy may be resilient in early 2014.
–Ruth Mantell
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