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Economy in Brief

Chicago Fed Index Provides Further Evidence of Momentum Lost
by Tom Moeller  May 23, 2011

The list of indicators suggesting that the economy's forward momentum has waned continues to lengthen. The Chicago Fed reported that its National Activity Index (CFNAI) retraced its earlier improvement and fell to -0.45 in April from a little-revised 0.32 in March. The three-month moving average of the index, which smoothes out some of the series' volatility, slipped to -0.12, the first negative reading since December. During the last ten years there has been an 81% correlation between the index and the Q/Q change in real GDP.

Three of the component series weakened in April. The production & income series turned sharply negative, falling to the lowest level since the recession's end. Employment, unemployment & hours dropped to the lowest since October while sales, orders & inventories slipped. Personal consumption remained negative but relatively stable.

The CFNAI is a weighted average of 85 indicators of economic activity. 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 77% correlation with the quarterly growth in real GDP.

A separate index covering just Midwest manufacturing activity jumped in March to its highest level in over ten years as both the factory and service sectors improved. The Chicago Federal Reserve figures are available in Haver's SURVEYS database.

Explaining the recent decline in the unemployment rate from the Federal Reserve Bank of Chicago is available here.

Chicago Federal Reserve Bank Apr Mar Feb Apr'10 2010 2009 2008
CFNAI -0.45 0.32 -0.23 0.34 -0.06 -1.59 -1.93
 3-Month Moving Average -0.12 0.08 0.13 0.15 -- -- --
  Personal Consumption & Housing -0.39 -0.39 -0.40 -0.33 -0.35 -0.40 -0.26
  Employment, Unemployment & Hours 0.06 0.24 0.42 0.33 0.03 -0.81 -0.67
  Production & Income -0.16 0.31 -0.05 0.25 0.21 -0.26 -0.70
  Sales, Orders & Inventories 0.04 0.15 -0.21 0.09 0.06 -0.12 -0.29
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