The Chicago Fed National Activity Index rose to +0.07 in September from a revised -0.08 in August, the Federal Reserve Bank of Chicago reported on Oct. 26. The reading exceeded the -0.1 consensus and marked the third above-trend month in four.
The index blends 85 indicators of national activity, with zero set at trend growth. Anything above zero means the economy is running faster than its historical pace.
Three of the four components improved month over month. Production and income contributed +0.13, the strongest since April, after subtracting 0.06 in August.
Sales, orders, and inventories flipped to +0.02, while employment, unemployment, and hours landed at a neutral 0.00.
The three-month moving average edged up to +0.03, a fourth straight positive print and well clear of the -0.70 level the Chicago Fed associates with recession.
- August 2026
- September 2026
Bar chart. Index Contribution. Production & Income: August 2026 -0.06, September 2026 0.13. Sales, Orders & Inventories: August 2026 -0.03, September 2026 0.02. Employment, Unemployment & Hours: August 2026 -0.02, September 2026 0. Personal Consumption & Housing: August 2026 0.02, September 2026 -0.08.
Factories did the heavy lifting
Industrial production climbed 0.7% in September, with manufacturing output up 0.3% after a 0.2% dip in August.
Capacity utilization for manufacturing reached 75.9%, still 2.3 percentage points under its long-run average going back to 1972.
Computer and electronic products led the year-over-year gains at 9.5%, consistent with the artificial intelligence buildout feeding factory orders. Automotive output fell 2.8% on the month.
Housing is pulling the other way
Personal consumption and housing subtracted 0.08 from the index, its weakest contribution since May 2025.
The drag shows up across the housing data. Pending home sales slid 7.3% in September to an all-time low in records going back to 2001, against a Wall Street estimate of a 0.4% decline.
Housing starts dropped 5.2%, and single-family permits totaled 845K, the fewest since 2023.
Mortgage rates sat above 7% for most of the month, ending near 7.6%.
"It is not winter yet but housing is going into a deep freeze."
Chris Rupkey, Fwdbonds
Homebuilder sentiment tells the same story, with the NAHB Housing Market Index falling to 29 in October, its lowest in more than 14 years.
The split leaves the Federal Reserve with a resilient industrial economy and a frozen housing market heading into its next meeting. Futures pricing implies a strong chance of a quarter-point hike in December and another in March 2027.
Consumers, for now, are holding up. Western Asset scored the US consumer at B- for the third quarter, with net worth at an all-time high offsetting weak real income growth.
