What is it ?

The Federal Reserve Bank of Chicago’s National Activity Index, CFNAI is released at 8:30 a.m. 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 suggesting there was a contraction in economic activity. decrease in economic growth, slowdown in U.S. economic growth.suggests economic growth declined or decreased. suggesting a pick up in economic activity.. Periods of economic expansion have historically been associated with an average higher than minus 0.7. A zero value for the monthly index has been associated with the national economy expanding at its historical trend. CFNAI-MA3: The three-month average, which smooths out monthly volatility. The CFNAI Diffusion Index, which is also a three-month moving average.

The Chicago Fed Explains

The Chicago Fed National Activity Index (CFNAI) provides a summary quantitative value for all the economic data being released. However, this index IS NOT accurate in real time and it did miss the start of the 2007 recession. This index is unique among regional Federal Reserve Bank indexes in that it is national in scope. The Chicago Fed National Activity Index (CFNAI) provides useful information on the current state of economic activity and inflationary pressures in the United States. Movements in the CFNAI closely track periods of economic expansion and contraction, as well as periods of rising and falling inflationary pressures. The 85 economic indicators underlying the CFNAI are drawn from five broad categories of data: output and income, employment, unemployment and hours, personal consumption, housing starts and sales, manufacturing and trade sales, and inventories and orders, each of these data series measures some aspect of overall macroeconomic activity. 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. Conversely, when the CFNAI-MA3 value moves above -0.70 following a period of economic contraction, there is an increasing likelihood that a recession has ended. What makes this report somewhat unique is that the regional Federal Reserve Bank indexes are local to one Fed region and this index is national in scope. Unfortunately, it is also older data compared to at least some more concurrent economic reports in the past 10 days or so.

CFNAI

The Chicago Fed National Activity Index (CFNAI) is a monthly index designed to better gauge overall economic activity and inflationary pressure. The CFNAI is a weighted average of 85 indicators of national economic activity. It is constructed to have an average value of zero and a standard deviation of one.

Since economic activity tends toward trend growth rate over time, a positive index reading corresponds to growth above trend and a negative index reading corresponds to growth below trend.

The Chicago Fed advises that a value below -0.70 after a period of economic expansion indicates an increasing likelihood that a recession has begun. A zero value for the index indicates that the national economy is expanding at its historical trend rate of growth, and that a level below -0.7 would be indicating a recession was likely underway.

The CFNAI is released at 8:30 a.m. E.T. on scheduled days, normally toward the end of each calendar month and is low importance.

Each of these data series measures some aspect of overall macroeconomic activity. The derived index provides a single, summary measure of a factor common to these national economic data.

The 85 economic indicators that constructed the Chicago Fed national index were 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.

The Chicago Fed National Activity Index (CFNAI) is a measure of how the national economy is faring relative to its historical trend rate.

The 3 Month Moving Average

When the CFNAI-MA3 moves above -0.70 following a period of economic contraction, there is an increasing likelihood that a recession has ended; surpassing a level of +0.20 indicates economic activity associated with sustained recovery. The Chicago Fed National Activity Index (CFNAI) provides a summary quantitative value for all the economic data being released. However, this index is not accurate in real time and it did miss the start of the 2007 recession. This index is a rear view mirror of the economy, and whilst the tend is clearly negative the index is telling that the economy did expand in June but that the expansion was significantly weaker than the previous month. A zero value for the index indicates that the national economy is expanding at its historical trend rate of growth, and that a level below -0.7 would be indicating a recession was likely underway. The three-month average of the index, which is a weighted average of 85 different economic indicators, is designed so that a zero reading equals trend growth and a reading below negative 0.70 indicates an increasing likelihood a recession has begun.