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Economy in Brief

Chicago Fed Nat'l Activity Index Remains Negative in June
by Tom Moeller  July 25, 2022

• Two of four components decline.

• Three-month index average turns negative.

The Federal Reserve Bank of Chicago reported that the Chicago Fed National Activity Index (CFNAI) held steady during June at -0.19. The May reading was revised from 0.01.

The index's three-month moving average fell to -0.04 from 0.09 in May. It was the first negative reading since June 2020. During the last 10 years, there has been 76% correlation between the change in the Chicago Fed Index and quarterly growth in real GDP.

Two of the four major components of the index were negative last month. The Production & Income reading of -0.20 last month compared to -0.17 in May. That was below 0.23 in April. The Personal Consumption & Housing index of -0.06 in June compared to -0.08 in the prior month. Remaining positive at 0.05 was the Employment, Unemployment & Hours figure which was little changed m/m, but down from a recent high of 0.33 in February. The Sales, Orders & Inventories reading improved to 0.03 from -0.01 in May.

The diffusion index, which measures the breadth of movement in the component series, fell to -0.04 during June after having reached a high of 0.46 just six months earlier. Forty-one of the index components contributed positively to the June index while 42 contributed negatively.

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. The CFNAI was constructed using data available as of March 17, 2022. February data for 50 of the 85 indicators had been published at that time. For all missing data, estimates were used in constructing the index.

The index is constructed by the Federal Reserve Bank of Chicago. These figures are available in Haver's SURVEYS database.

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