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Economy in Brief

Chicago Fed Index Remains Near Its Highest
by Tom Moeller June 28, 2010

The U.S. economy is continuing its improvement. At a reading of 0.21, the National Activity Index (CFNAI) reported by the Chicago Fed held near its earlier levels which were upwardly revised. The latest was near the highest since 2006 and added to earlier gains from the series' low of -4.14 reached in January '09. During the last ten years the has been a 76% correlation between the index level and the q/q change in real GDP.

The three-month moving average of the index, which smoothes out some of the series' volatility, also rose to its highest level since early-2006.

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 3.0%. The complete CFNAI report is available here.

The Chicago Fed indicated that improvement in the production & income component added greatly to the May index. Overall, 44 of the individual indicators made positive contributions to the index while 41 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 improved during April to its highest level since December 2008. Indicators for the steel, machinery and resource sectors each rose. The Chicago Federal Reserve figures are available in Haver's SURVEYS database.

Chicago Fed May April March May '09 2009 2008 2007
CFNAI 0.21 0.25 0.38 -2.30 -1.60 -1.80 -0.3
  3-Month Moving Average 0.28 0.05 -0.01 -2.62 -- -- --
    Personal Consumption & Housing -0.42 -0.40 -0.32 -0.46 -0.49 -0.32 -0.09
    Employment, Unemployment & Hours 0.06 0.21 0.14 -0.93 -0.76 -0.67 -0.15
    Production & Income 0.51 0.39 0.29 -0.63 -0.23 -0.56 -0.05
   Sales, Orders & Inventories 0.06 0.04 0.27 -0.29 -0.13 -0.25 -0.06
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