STIR: Recent Data & Deflationary Nature Of Budget Should Insulate Front End

The Chicago Fed Survey of Economic Conditions (CFSEC)'s regional activity index rose to +15 in October from -14 prior, suggesting above-trend growth in the 7th Fed District. While this series is volatile, we note that this is the highest reading since March 2022, and comes with improvements in both manufacturing (+14 after -10) and nonmanufacturing (+16 after -19).

• This represents an indication of solid regional activity - but the subindices were actually quite poor across the board: hiring and capex intentions were negative (ie below average), while both labor cost and nonlabor cost pressures were also negative, suggestive of more moderate inflation.
• The indices roughly mirror the MNI Chicago Business Barometer (PMI) and national ISM Services/Manufacturing, though with more month-to-month volatility, so can be considered a positive in the services activity column after weak NY and Philly Fed surveys for October, as well as a solid manufacturing reading vs mixed NY / Philly.
• The latest Chicago Fed entry to the Beige Book covering September: "Economic activity in the Seventh District was little changed over the reporting period, and contacts expected a slight decrease in activity over the next year. Consumer spending increased modestly; construction and real estate activity increased slightly; employment was flat; nonbusiness contacts saw no change in activity; business spending declined slightly; and manufacturing activity declined modestly."

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