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Economy in Brief

Chicago Fed National Activity Index Weakens in August
by Tom Moeller  September 26, 2022

• Three of four components ease.

• Three-month average is barely positive.

The Federal Reserve Bank of Chicago reported that the Chicago Fed National Activity Index (CFNAI) declined in August to 0.00 from 0.29 in July, revised from 0.27. The May and June readings were both negative.

The index's three-month moving average improved to 0.01 in August after holding steady m/m at -0.08 in July. The figure was down from a recent high of 0.48 in December. During the last 10 years, there has been 76% correlation between the change in the Chicago Fed Index and quarterly growth in real GDP.

The Production & Income reading of -0.08 last month compared to 0.12 in July and -0.21 in June. It remained below this year's high of 0.19 in April. The Employment, Unemployment & Hours component fell to 0.03 from 0.12. It remained down from the high of 0.33 in February. Sales, Orders and Inventories eased to 0.01 from 0.03 in July. It followed several negative readings earlier in the year. The Personal Consumption & Housing index rose to 0.05 last month from 0.01 in July.

The diffusion index, which measures the breadth of movement in the component series, rose to 0.11 during August from 0.01 in July. These readings compare to to a high 0.35 in March. Forty-six of the components contributed positively to the August index while 39 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 trends 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 August 18, 2022. August data for 51 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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