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Economy in Brief

Chicago Fed National Activity Index Weakens Again in September
by Tom Moeller  October 26, 2020

• Index suggests slower economic growth.

• Component performance is mixed.

Forward economic momentum diminished last month. The Federal Reserve Bank of Chicago's National Activity Index declined during September to 0.27 from 1.11 in August, revised from 0.79. The index level was the lowest of five consecutive readings.

The three-month moving average, which smoothes out the m/m volatility in the index, fell in September to 1.31 from 3.22 in August. During the last 20 years, there has been a 76% correlation between the Chicago Fed Index and quarterly growth in real GDP.

The Sales, Orders & Inventories series eased negligibly. The Employment, Unemployment & Hours showed lessened growth. The Personal Consumption & Housing series improved modestly last month versus August, but remained low. The Production & Income series turned negative following four straight positive readings. The diffusion index, which measures the breadth of movement in the components, decreased to 0.51 from 0.71 as 50 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 Sep Aug Jul Sep '19 2019 2018 2017
Chicago Fed National Activity Index (+ = Growth Above Trend) 0.27 1.11 2.61 -0.33 -0.14 0.12 0.13
   Production & Income -0.24 0.31 1.40 -0.26 -0.10 0.07 0.06
   Employment, Unemployment & Hours 0.35 0.71 0.67 0.03 0.01 0.08 0.06
   Personal Consumption & Housing 0.09 0.00 0.04 -0.05 -0.02 -0.04 -0.03
   Sales, Orders & Inventories 0.07 0.10 0.50 -0.04 -0.03 0.01 0.04
CFNAI 3-Month Moving Average 1.33 3.22 4.25 -0.13 -- -- --
CFNAI Diffusion Index 0.51 0.71 0.74 -0.10 -0.11 0.15 0.13
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