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Economy in Brief

Chicago Fed National Activity Index Moderates in July
by Gerald D. Cohen  August 24, 2020

• Activity index declines to 1.18 in July.

• Production and income indicators led the gain. Sales, orders and inventories decline.

The Federal Reserve Bank of Chicago's National Activity Index decreased to 1.18 in July from an upwardly-revised 5.33 in June (was 4.11). This data suggests a moderation in activity after a bounce in late spring. The three-month moving average, which smooths out volatility in the monthly figures though is less important at the moment because of changing conditions, improved to 3.59 from -2.78. During the last 20 years there has been a 78% correlation between the Chicago Fed Index and the quarter-on-quarter real GDP growth.

Three out of four of the contributing sectors increased in July led by the production and income indicators, which contributed 1.09 points to the gain. The diffusion index, which measures the breadth of movement in the monthly series, increased to 0.62 as 56 out of the 85 components improved.

The CFNAI is a weighted average of 85 monthly indicators of national economic activity. It is constructed to have an average value of zero and a standard deviation of one. Since economic activity tends toward trend growth rate over time, a positive index reading corresponds to growth above trend and a negative index reading corresponds to growth below trend.

These figures are available in Haver's SURVEYS database.

Federal Reserve Bank of Chicago Jul Jun May Jul '19 2019 2018 2017
National Activity Index (+ = Growth Above Trend) 1.18 5.33 4.24 -0.24 -0.14 0.12 0.13
   Production & Income 1.09 2.21 0.82 -0.16 -0.10 0.07 0.06
   Employment, Unemployment & Hours 0.38 1.94 1.71 0.02 0.01 0.08 0.06
   Personal Consumption & Housing 0.02 0.42 0.93 -0.03 -0.02 -0.05 -0.03
   Sales, Orders & Inventories -0.31 0.77 0.78 -0.06 -0.03 0.01 0.04
  3-Month Moving Average 3.59 -2.78 -6.00 -0.04 -- -- --
Diffusion Index 0.62 0.14 -0.42 -0.01 -0.10 0.16 0.13
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