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Economy in Brief

Chicago Fed Index Turns Positive
by Tom Moeller  January 27, 2011

The Chicago Fed reported that its National Activity Index (CFNAI) rose last month to 0.03. It was the first positive figure since July. However, the index remained down sharply since its March peak, suggesting that the economy's recovery has lost forward momentum. The three-month moving average of the index, which smoothes out some of the series' volatility, improved to -0.22.

An index level at or below -0.70 typically has indicated negative U.S. economic growth. A zero value of the CFNAI suggests that the economy is expanding at its historical trend rate of growth. During the last ten years it's had an 78% correlation with the quarterly growth in real GDP.

The CFNAI is a weighted average of 85 indicators of economic activity. The Chicago Fed indicated that December's improvement was due mostly to the labor market series and the production & income numbers. Other indicators were roughly stable or improved. Forty-five of the 85 individual indicators made positive contributions to the index in December, while 40 had a negative effect. The Fed also indicated that 48 indicators improved from October to November, while 36 indicators deteriorated.

In a separate survey, the Chicago Fed indicated that its Midwest manufacturing index during December improved slightly m/m to its highest since December 2008. Indicators for the steel, machinery and resource sectors increased m/m while autos slipped. The Chicago Federal Reserve figures are available in Haver's SURVEYS database.

Chicago Federal Reserve Bank Dec Nov Oct Dec '09 2010 2009 2008
CFNAI 0.03 -0.40 -0.30 0.44 -0.11 -1.53 -1.85
 3-Month Moving Average -0.22 -0.36 -0.39 -0.41 -- -- --
  Personal Consumption & Housing -0.43 -0.39 -0.37 -0.40 -0.38 -0.42 -0.28
  Employment, Unemployment & Hours 0.15 -0.11 0.11 -0.25 0.05 -0.78 -0.67
  Production & Income 0.26 0.04 0.02 0.12 0.18 -0.21 -0.61
  Sales, Orders & Inventories 0.05 0.04 -0.06 0.10 0.04 -0.11 -0.29
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