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First Cut: Atlanta Fed Uncertainty Index remained high in February

The Atlanta Fed/Chicago Booth/Stanford Survey of Business Uncertainty (SBU) for February put the Uncertainty Index at 113.6, down from 114.1 in January when it was the highest since 114.6 in May 2015. The index has been holding at nearly 5-year highs for the past three months and point to uncertainty greater than even when recession fears were up in the summer of 2019 or the slowdown in global economic conditions became evident late in 2018. In part the uncertainty may be related to the outbreak of COVID-19 that first became a potential threat to the Chinese economy in late 2019 and is showing every indication it could become a pandemic with unpredictable impacts.

Uncertainty about employment showed little change recently. The index for employment was essentially unchanged at 93.5 in February after 93.6 in January. Uncertainty about growth in sales revenues was less at 113.5 after 119.1. However, uncertainty about growth in capital investment was u p to 116.8 after rising to 112.1 in January.

The index for business expectations rose to 104.5 in February from 103.4 in January and was the highest since 104.9 in May 2019. The level and direction suggest that businesses are anticipating their best level of activity in nearly a year. The details are somewhat less encouraging. The index for expected growth in sales revenues dipped to 83.6 in February after 88.3 in January, but it was more consistent and elevated than during the heightened risk of recession in the second half of 2019. The index for employment expectations was down to 106.6 in February from 108.1 in January but the decline is the second best reading in just over a year and should not be read as anything but solid. Expectations for capital investment expenditures was up nearly 9 points to 119.5 in February, its highest since 120.2 in February 2018. If realized, this would be good news for economic growth since business investment has been moribund for some quarter. Personal consumption expenditures could use an assist as a driver of GDP growth.

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