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Economy in Brief

Chicago Fed Index Rose After Hurricanes
by Tom Moeller November 24, 2008

The October National Activity Index (CFNAI) from the Chicago Federal Reserve Bank improved last month after Hurricanes depressed economic activity during September. The index, however, remained in recession territory. The latest reading of -1.06 roughly equaled the averages of the first and second quarters of this year but improved from the third quarter average of -2.15.Since 1970 there has been a 75% correlation between the level of the index and the q/q change in real GDP.

The three-month moving average of the index held roughly steady at -2.09. The latest was near 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 category made a positive contribution to the October index as it recovered from a depressed level the month earlier. Conversely the income, housing, consumption and employment categories had a negative influence on the total.

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 during September to its lowest level since 2003. The auto sector continued to lead the weakness but the steel, machinery and resource sector components also were weak.

The Joint Statement by Treasury, Federal Reserve, and the FDIC on Citigroup can be found here.

Chicago Fed October September October '07 2007 2006 2005
CFNAI -1.06 -3.11 -0.75 -0.41 -0.02 0.28
  3-Month Average -2.09 -2.16 -0.59 -- --  --
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