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Economy in Brief

 Chicago Fed Nat'l Activity & Richmond Fed Factory Indexes Up
by Tom Moeller July 26, 2006

The National Activity Index (CFNAI) from the Federal Reserve Bank of Chicago rose to the highest level (0.34) since March. The gain, nevertheless, failed to prevent the 2Q average from falling to 0.11 from 0.24 in 1Q.

The three-month moving average of the CFNAI remained stable with May at that 0.11 level which is the lowest since October.

A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth and during the last twenty years there has been a 68% correlation between the level of the CFNAI and q/q growth in real GDP.

The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production and income, the labor market, personal consumption and housing, manufacturing and trade sales, and inventories & orders.

The latest CFNAI report is available here.

The Federal Reserve Bank of Richmond reported that its July Composite Index from the manufacturing survey rose to the highest level (12) since April. During the last ten years there has been a 38% correlation between the diffusion index level and the one month change in U.S. manufacturing industrial production. The July report can be found here.

The Richmond Fed's survey of the service sector, conversely, deteriorated in July. The percentage of firms reporting increasing revenues was negative (-3) for the first month in nearly two years. The latest report is available here.

Economy on cruise control through 2007 from the Federal Reserve Bank of Chicago can be found here.

Chicago Fed June May June '05 2005 2004 2003
CFNAI 0.34 -0.14 0.36 0.20 0.37 -0.11
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