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Economy in Brief

Chicago Fed Index At Recession Level
by Tom Moeller September 22, 2008

The August National Activity Index (CFNAI) from the Chicago Federal Reserve Bank dropped sharply from July. The reading of -1.59 was its lowest level since the last recession during 2001.The current index level was then associated with -1.4% (AR) growth in quarterly real GDP.

The three-month moving average of the index also fell, but the drop was more moderate to -1.09 from -0.92 during July. The latest figure was exceeded, to the downside, during April.

An index level at or below -0.70 typically has indicated negative U.S. economic growth. 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.

All of the categories of the August index were indicated to have made negative contribution to the total during August, but the largest came from the production figures.

Inflationary pressure also was indicated to be low for the coming year.

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.

In a separate survey, the Chicago Fed indicated that its Midwest manufacturing index improved again. The July index level was at its highest since this past March. Each of the component series, for the auto sector, machinery and resource sectors, rose and offset deterioration the steel sector index.

The U.S. Economic Situation and the Challenges for Monetary Policy is adapted from speeches made by San Francisco Fed Janet Yellen and it can be found here.

Chicago Fed August July August '07 2007 2006 2005
CFNAI -1.59 -0.93 -0.76 -0.43 -0.03 0.27
  3-Month Average -1.09 -0.92 -0.30  
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