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Economy in Brief

Chicago Fed Index Gives Back Its Earlier Improvement
by Tom Moeller   September 27, 2010

The August National Activity Index (CFNAI), reported by the Chicago Fed, backpedaled and returned to nearly its lowest level of the economic recovery. The decline to -0.53 was from a revised -0.11 during July and indicated that forward momentum behind the U.S. recovery has waned considerably. The three-month moving average of the index, which smoothes out some of the series' volatility, fell to -0.42, its lowest level since December.

Since these figures remain up from the low of -4.10 reached in January '09, they still represent improvement. 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.

The Chicago Fed indicated that most of the August deterioration resulted from declines in the values for employment as well as production & income. The other component series were roughly flat. Thirty-four of the 85 individual indicators made positive contributions to the index in August, while 51 had a negative effect. The Fed also indicated that 42 indicators improved from July to August, while 42 indicators deteriorated and one was unchanged.

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 during July improved to its highest level since December 2008. Indicators for the auto and steel sectors improved sharply. The Chicago Federal Reserve figures are available in Haver's SURVEYS database.

Implications of the Financial Crisis for Economics is the title of Friday's speech by Fed Chairman Ben S. Bernanke and it can be found here.

Chicago Fed August July June August'09 2009 2008 2007
CFNAI -0.53 -0.11 -0.63 -0.56 -1.55 -1.85 -0.29
 3-Month Moving Average -0.42 -0.27 -0.11 -0.79 -- -- --
    Personal Consumption & Housing -0.40 -0.44 -0.45 -0.31 -0.44 -0.29 -0.09
   Employment, Unemployment &
   Hours
-0.12 0.09 -0.14 -0.53 -0.77 -0.67 -0.16
   Production & Income 0.00 0.23 -0.07 0.53 -0.21 -0.60 -0.05
   Sales, Orders & Inventories -0.01 0.01 0.04 -0.24 -0.11 -0.28 -0.03
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