By Xavier Fontdegloria
U.S. economic growth declined in December for the first time since February, according to an index compiled by the Federal Reserve Bank of Chicago published Monday.
The Chicago Fed National Activity Index decreased to minus 0.15 in December from 0.44 in November, missing the 0.25 consensus forecast from economists polled by FactSet.
The CFNAI index is composed of 85 economic indicators from four broad categories of data: production and income; employment, unemployment and hours; personal consumption and housing; and sales, orders and inventories. A negative reading signals that growth was below trend.
U.S. economic growth is expected to have picked up pace in the last three months of the year, but rising Covid-19 cases due to the spread of the Omicron variant and high inflation are set to hit growth in early 2022, economists say.
In December, two of the four broad categories of indicators used to construct the index made positive contributions, and all four categories deteriorated compared with the previous month, the Chicago Fed said.
The decline in the headline index was led by a fall in production indicators, which contributed minus 0.13 points compared with 0.25 in November. In December, both manufacturing production and capacity utilization fell on month as factories continued to struggle with supply-chain bottlenecks and growing worker absenteeism.
The personal consumption and housing category also contributed negatively to the national activity index, by minus 0.19 compared with minus 0.02 the previous month.
Employment indicators contributed 0.13 to the CFNAI, down from 0.16 the previous month, as job creation slowed over the month.
The contribution of the sales, orders and inventories category ticked down to 0.03 in December from 0.05 in November, the Chicago Fed said.
The CFNAI diffusion index decreased to 0.37 in December from 0.42 in November, while the index's three-month moving average, the CFNAI-MA3, fell to 0.33 from 0.40 the prior month. Both the diffusion index and the CFNAI-MA3 suggest that the U.S. economy expanded in the fourth quarter.
Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com
(END) Dow Jones Newswires
01-24-22 0844ET
