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Economy in Brief

Chicago Fed Index Fell Deeper Into Negative Territory
by Tom Moeller October 21, 2008

The National Activity Index (CFNAI) from the Chicago Federal Reserve Bank for September moved deeper into recession territory. The reading of -2.57 was the lowest since early during the 1981-82 recession.The current index level was then associated with -6.4% (AR) growth in real GDP during 1Q 1982.

The three-month moving average of the index also fell to -1.78 from -1.18 during August. The latest was its lowest since the last recession, early in 1991.

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.

The production and income categories made the largest negative contribution to the total index's decline during September, though each of the component categories added a negative influence.

Inflationary pressure also was indicated to be low for the coming year with price index at it's lowest since 1990.

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 fell. The August index level reversed its recent improvement and fell to the lowest level since 2003. A decline in the auto sector component of the series led the weakness.

Revisiting Useful Approaches to Data-Rich Macroeconomic Forecasting from the Federal Reserve Bank of New York is available here.

Chicago Fed September August September '07 2007 2006 2005
CFNAI -2.57 -1.61 -0.30 -0.43 -0.03 0.27
  3-Month Average -1.78 -1.18 -0.32 -- --  --
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