In my CFNAI update yesterday I repeated my warning that "it's unwise to read very much into the data for any specific month. Also data revisions frequently make the real-time headline subsequently inaccurate. The 3-month moving average is a better number to watch."

The two latest reports offer a classic illustration of the point. The CFNAI headline in the July report was "Economic Activity Increased". Likewise the August report has the "Economic Activity Increased" headline. "Great!" you assume, "Two months of increasing economic activity." But your assumption would be wrong.

Here is an overlay of the two most recent reports. The May decline was less sharp, and the June increase evaporated.

Let's compare the 3-month moving average, which provides a more reliable snapshot of this coincident indicator of the economy. After all, each month the latest data we're looking at is preliminary, subject to revision -- sometimes significant.

The 3-month moving average suggests that the current trend is not one of improving economic activity.