WASHINGTON (MarketWatch) -- The U.S. economy took a small step backwards in August on its road to recovery, according to a national index released Monday by the Chicago Federal Reserve Bank. The Chicago Fed's National Activity Index dropped back to negative 0.90 in August from an upwardly revised negative 0.54 in July. Only one of the four broad categories of indicators made a positive contribution in August. The production and income component was positive for the second straight month. Employment, consumption and housing, and sales made negative contributions. Thirty-one of the 85 indicators made positive contributions. Forty-seven of the 85 indicators improved relative to July. The index was at negative 2.01 in August 2008, and was at negative 4.13 in January. Read more. The three-month average dropped to negative 1.09 in August from negative 1.61 in July, improving for the seventh straight month after peaking at negative 3.63 in January. The index, which is based on 85 economic indicators, is designed so that zero means the economy is growing at its historical long-term rate. When the three-month average drops below negative 0.70, a recession is likely. When the three-month average rises above 0.70 during an expansion, there is a higher chance of sustained accelerating inflation.

Source