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Economy in Brief

Chicago Fed Nat'l Activity & Richmond Fed Mfg. Indexes Down
by Tom Moeller August 23, 2006

At -0.12 for July, the National Activity Index (CFNAI) from the Federal Reserve Bank of Chicago was negative for the second month in the last three. Moreover, the three-month moving average of the CFNAI fell to 0.07, its lowest level in over a year.

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 August Composite Index from the manufacturing survey at 3 was at its lowest level since May. 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 August report can be found here.

The Richmond Fed's survey of the service sector, conversely, improved. In August, the percentage of firms reporting increasing revenues returned to positive territory and the percentage of employees was at its highest in a year. The latest report is available here.

Chicago Fed July June July '05 2005 2004 2003
CFNAI -0.12 0.43 0.10 0.20 0.35 -0.15
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