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Economy in Brief

Chicago Fed Index Dipped Last Month But Trend Level Still Rising
by Tom Moeller October 26, 2009

The Chicago Federal Reserve Bank indicated that while the U.S. economy had improved, growth was still below the historic trend. For September, the Chicago Fed National Activity Index (CFNAI) slipped m/m after having improved sharply from the January low. The reading of -0.90 was down from -0.56 during August yet both readings were up sharply 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 Chicago Fed indicated that 32 of the series' individual indicators made positive contributions to the September index while 53 made negative contributions. 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 slipped during August but remained near its lowest since late-1993. Indicators for the steel, machinery and resource sectors improved modestly, however, that was outweighed by deterioration in the auto sector. The Chicago Federal Reserve figures are available in Haver's SURVEYS database.

International Perspective on the Crisis and Response is the title of Friday's speech by Fed Vice-Chairman Donald L. Kohn and it can be found here here

Chicago Fed September August July August '08 2008 2007 2006
CFNAI -0.90 -0.56 -1.82 -2.01 -1.77 -0.35 0.05
3-Month Moving Average -1.09 -1.61 -2.15 -1.42 -- -- --
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