The Chicago Fed National Activity Index slipped to -0.04 in August, returning to negative territory as softer production and business-cycle indicators outweighed modest improvement in employment, consumption and housing measures. The July reading was revised to +0.08, according to the latest data released September 21 by the Federal Reserve Bank of Chicago.

The monthly reading indicates that U.S. economic activity was running slightly below its historical trend in August. The CFNAI is constructed so that a value of zero is associated with economic growth at its long-run average rate, while negative values correspond to below-average growth and positive readings indicate above-average growth. Because the August figure was only modestly below zero, the report points to a mild loss of momentum rather than a sharp deterioration in national activity.

The index is designed to provide a broad assessment of the U.S. economy by combining 85 monthly indicators into a single measure. Those indicators fall into four major categories: production and income; employment, unemployment and hours; personal consumption and housing; and sales, orders and inventories. The breadth of the data set makes the CFNAI useful as a cross-check on more narrowly focused releases covering manufacturing, jobs, housing or household demand.

The most significant source of weakness in August came from production-related indicators. That category contributed -0.07 to the overall CFNAI, compared with a neutral contribution in July. The deterioration was consistent with other recent evidence showing less momentum in the industrial economy. Federal Reserve data released September 18 showed total U.S. industrial production was essentially unchanged in August after increasing 0.2% in July, while manufacturing output declined 0.3%.

The composition of the industrial-production report also underscored the uneven nature of August activity. Mining output edged up 0.1% and utilities production increased 1.8%, but the decline in manufacturing limited the overall advance. Total industrial production remained 1.4% above its August 2025 level, indicating that the industrial sector was still larger than a year earlier even as month-to-month momentum weakened.

That distinction is important for interpreting the CFNAI. A negative monthly reading does not necessarily mean economic output is falling outright. Instead, it indicates that the combination of indicators is performing below its historical growth norm. August’s -0.04 reading therefore suggests moderation relative to trend rather than a broad contraction in economic activity.

The sales, orders and inventories category also lost substantial momentum. Its contribution fell to approximately zero in August from +0.15 in July. While the category did not become a material drag on the headline index, the disappearance of July’s positive contribution was an important reason the overall CFNAI moved back below zero.

Sales, orders and inventory indicators tend to capture parts of the economic cycle that can shift relatively quickly as businesses respond to demand, financing conditions and expectations for future production. A move from a strongly positive contribution to a neutral one therefore suggests that the business-side impulse that supported the July reading was not sustained at the same strength in August.

Labor-market-related indicators moved in the opposite direction. The employment, unemployment and hours category contributed +0.01 to the August CFNAI, improving from -0.01 in July. The change was small, but it helped prevent the decline in production from producing a more negative headline reading. The labor component’s move into positive territory is also consistent with the broader interpretation that August represented a mixed slowdown rather than synchronized weakening across the economy.

Personal consumption and housing indicators similarly improved. That category contributed +0.01 in August after contributing -0.06 in July. The swing provided another offset to the decline in production and the loss of support from sales, orders and inventories. With household activity and labor indicators both making slightly positive contributions, the August CFNAI showed that weakness remained concentrated rather than universal.

The underlying breadth nevertheless softened. Of the 85 individual indicators in the CFNAI, 39 made positive contributions in August and 46 made negative contributions. Thirty-four indicators improved from July, while 49 deteriorated, leaving two broadly unchanged. That distribution indicates that the slight negative headline reading was accompanied by more declining indicators than improving ones, although the balance was not extreme.

The CFNAI Diffusion Index, which measures how broadly changes are distributed across the underlying indicators and is calculated on a three-month moving-average basis, eased to +0.02 in August from +0.04 in July. The positive reading still points to generally expansionary breadth by the Chicago Fed’s historical framework, but the decline shows that the distribution of economic strength became somewhat less favorable during the latest period.

Investors and economists may place particular emphasis on the CFNAI’s three-month moving average because the monthly index can be volatile and subject to meaningful revisions. The CFNAI-MA3 increased to +0.01 in August from -0.01 in July. A level close to zero indicates that, after smoothing short-term fluctuations, national activity was running near its historical trend rate.

That smoothed reading gives a more balanced signal than the monthly decline alone. The shift of the headline CFNAI from +0.08 in July to -0.04 in August suggests a cooling of momentum, but the three-month average remaining essentially neutral indicates that the broader economy had not moved materially away from trend growth across the recent period.

The revisions to prior months also demonstrate why interpreting a single CFNAI release requires caution. July had previously been reported substantially weaker before subsequent incoming data altered the index calculation, and the current series shows July at +0.08. Because the CFNAI incorporates dozens of data series that themselves can be revised, historical index values can change as more complete information becomes available.

For that reason, the Chicago Fed emphasizes the three-month moving average and diffusion measure alongside the headline monthly figure. Taken together, August’s readings suggest an economy with slower short-term momentum but without the type of broad, sustained weakness historically associated with recessionary conditions.

The latest three-month average is particularly far from the Chicago Fed’s historical recession benchmark. Following a period of economic expansion, a CFNAI-MA3 reading below -0.70 has historically been associated with an increasing likelihood that a recession has begun. August’s +0.01 reading is nowhere near that threshold. The CFNAI therefore should not be interpreted as signaling recession based on the Chicago Fed’s established historical framework.

The inflation signal embedded in the index is similarly subdued. The Chicago Fed notes that readings of the three-month average above +0.70, once an expansion has been underway for more than two years, have historically been associated with a growing likelihood of sustained increases in inflationary pressure. The August three-month average near zero provides little indication of unusually strong demand-driven inflation pressure from the pace of overall economic activity.

That combination — modestly below-trend monthly activity, a near-neutral three-month average and relatively restrained inflation implications — leaves the U.S. economy in a middle ground. The data do not show the broad acceleration that would characterize an economy moving significantly above trend, but they also do not show a generalized contraction across production, employment, consumption and business activity.

The production component will likely receive particular attention in subsequent releases because it accounted for more than the entire net decline in the August headline index before offsets from other categories. The Federal Reserve’s separate industrial-production data showed manufacturing weakness even as utilities and mining provided support, suggesting that the industrial side of the economy entered the end of the third quarter with uneven momentum.

At the same time, the positive employment contribution gives the expansion an important buffer. Labor-market indicators generally influence household income, consumer spending and confidence, so continued stability in employment would help limit the risk that industrial softness spreads more broadly. Conversely, any renewed weakening in labor indicators would make future negative CFNAI readings more consequential because weakness would then extend across a larger portion of the economy.

The rebound in the personal consumption and housing component also bears watching. Its improvement from -0.06 in July to +0.01 in August reversed an important source of weakness in the previous month. While the contribution was only marginally positive, the shift suggests that household-related indicators did not reinforce the industrial slowdown during August.

For financial markets, the August report adds to the evidence that U.S. growth is neither decisively accelerating nor contracting. A near-trend economy can produce mixed signals across asset classes because softer growth may temper expectations for corporate demand and industrial earnings while also reducing the risk that excessive activity generates additional inflation pressure.

The CFNAI is especially useful in that environment because it synthesizes information already appearing across multiple economic reports. Rather than forecasting activity from a single sector, it measures the common direction of a large collection of indicators. August’s negative monthly reading therefore provides confirmation that economic momentum softened, but the positive three-month average limits the strength of that conclusion.

The latest figures also reinforce the importance of separating the level of activity from the direction of change. Economic conditions weakened relative to July, but the August index remained close to zero, and the smoothed measure remained slightly positive. That configuration is consistent with an economy growing near its historical norm while experiencing short-term softness in several cyclical sectors.

Upcoming readings will determine whether August represents a temporary dip or the beginning of a more persistent period of below-trend activity. A renewed positive contribution from production and sales indicators could quickly pull the headline CFNAI back above zero, particularly if employment and household-related measures remain stable. Conversely, continued industrial weakness combined with softer labor or consumption data would put greater downward pressure on both the monthly index and its three-month average.

For now, the September 21 release presents a restrained macroeconomic signal. The CFNAI’s decline to -0.04 shows that August activity slipped slightly below its historical trend, led by production weakness and fading support from sales and orders. Yet the +0.01 three-month average, modestly positive labor and household contributions, and diffusion index above zero indicate that the broader economy remained close to trend rather than moving into a widespread downturn.