Monday, February 23, 2009

Chicago Fed National Activity Index Below Trend

Although the Chicago Fed National Activity Index rose .20 points in January, the index remains below trend. The CFNAI came in at -3.45 versus -3.65 in December. The three-month moving average fell to -3.41, to its worst reading since February 1975, one month before that recession ended.

A longer term view of the CFNAI is detailed below:


What is the CFNAI?
The index is a weighted average of 85 indicators of national economic activity. The indicators are drawn from four broad categories of data:
  1. production and income,
  2. employment, unemployment, and hours,
  3. personal consumption and housing, and
  4. sales, orders, and inventories.
A zero value for the index indicates that the national economy is expanding at its historical trend rate of growth; negative values indicate below-average growth; and positive values indicate above-average growth.

When the CFNAI-MA3 value moves below –0.70 following a period of economic expansion, there is an increasing likelihood that a recession has begun. When the CFNAI-MA3 value moves above +0.70 more than two years into an economic expansion, there is an increasing likelihood that a period of sustained increasing inflation has begun.


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