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Economy in Brief

Chicago Fed Index Lower Last Month But Trend Still Firm
by Tom Moeller September 28, 2009

The Chicago Federal Reserve Bank reported that its National Activity Index slipped last month after having improved sharply from the January low. The reading of -0.90 was down from -0.56 during July but both figures were well improved from the series' low of -4.13 reached this past January. Since 1970 there has been a 74% correlation between the level of the index and the q/q change in real GDP but during the last ten years that correlation has risen to 80%.

The three-month moving average which smoothes out some of the volatility of the index improved to its highest level since June of '08.

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%. The complete CFNAI report is available here.

The production and employment components made smaller positive contributions to the August CFNAI than during July while the consumption, housing, sales, orders and inventories categories improved. Overall, thirty-one of the index components had a positive influence while 54 made a negative contribution.

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 slightly during July but remained near its lowest since late-1993. Indicators for the auto sector improved but for the steel and machinery sectors the series fell to new cycle lows. The Chicago Federal Reserve figures are available in Haver's SURVEYS database.

Friday's speech by Fed Governor Kevin Warsh titled Longer Days, Fewer Weekends can be found here.

Chicago Fed August July August '08 2008 2007 2006
CFNAI -0.90 -0.56 -2.01 -1.77 -0.35 0.05
  3-Month Moving Average -1.09 -1.61 -1.42 -- -- --
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