Chicago Fed National Activity Index Declines Sharply in May
by:Tom Moeller
|in:Economy in Brief
Summary
• Two of four major components fall.
• Three-month moving average weakens.
The Federal Reserve Bank of Chicago reported that the Chicago Fed National Activity Index (CFNAI) declined to 0.01 during May following a rise to 0.40 in April, revised from 0.47. It was the weakest reading of economic activity since September of last year.
Smoothing out the m/m volatility, the index's three-month moving average fell to 0.20 from 0.40 in April. That was the lowest figure since June 2021. 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 index's major components weakened versus April, and two improved. The Personal Consumption & Housing component fell to -0.11 from 0.10. It was the weakest reading since December, down from a high of 0.18 in January. The Production & Income index fell to -0.01 after rising to 0.29 in April. Working the other way, the Sales, Orders & Inventories reading rose to 0.05 last month following three consecutive negative monthly readings. The Employment, Unemployment & Hours figure improved to 0.08 from 0.07.
The diffusion index, which measures the breadth of movement in the component series, fell to 0.27 during May after having reached highs of 0.46 last November and December. Forty-seven of the index components contributed positively to the May index while 38 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.
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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