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Economy in Brief

Chicago Fed Index So Low Perhaps Indicates Recession
by Tom Moeller March 24, 2008

The February National Activity Index (CFNAI) published by the Chicago Federal Reserve fell to its lowest level since April of 2003. At a negative 1.04 following downwardly revised readings in January and December '07 the latest figure lowered the three month moving average to -0.87, its lowest level since 1Q03. That low reading 2003 was then associated with real GDP growth of 0.20% in 4Q02 and of 1.20% in 1Q03.

The Chicago Fed's release indicated "an increasing likelihood that a recession has begun." A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth of roughly 3%. 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 complete CFNAI report is available here and the historical data are available in Haver's Surveys database.

During February, each of the four broad categories of indicators — employment, production, consumption and housing — continued to make negative contributions to the CFNAI.

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

Economic Outlook Symposium: Summary of 2007 results and forecasts for 2008 from the Federal Reserve Bank of Chicago can be found here.

Chicago Fed February January February '07 2007 2006 2005
CFNAI -1.04 -0.68 -0.28 -0.44 0.01 0.28
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