Haver Analytics
Haver Analytics
| May 25 2023

Chicago Fed National Activity Index Increases in April

  • The Chicago Fed National Activity Index increased into positive territory in April.
  • Led by improvements in production-related indicators.
  • However, the key 3-month average fell further into negative territory, pointing to increased recession risk.

The Federal Reserve Bank of Chicago reported that its National Activity Index (CFNAI) rose to +0.07 in April from a downwardly revised -0.37 in March (initially -0.19) and a downwardly revised -0.37 in February (previously -0.19). Notwithstanding the April increase, the downward revisions to February and March led to a decline in the less volatile three-month moving average of the index—to -0.22 in April from a downwardly revised -0.12 in March (initially +0.01). The April CFNAI was constructed using data available as of May 23, 2023. At that time, April data for 51 of the 85 indicators had been published. For all missing data, estimates were used in constructing the index.

Due to the index’s monthly volatility, financial markets and researchers focus on the index's three-month moving average. This index is expressed in standard deviation units from zero (with a value of zero defined as trend real GDP growth). Research at the FRB Chicago indicates that a reading on the three-month average of -0.70 or below is consistent with the economy being in a recession. So clearly, the April reading does not indicate that the economy is currently in a recession, but the recent declines do point to increased recession risk.

The April increase in the monthly figure was led by improvements in production-related indicators, which contributed 0.15 point in April after subtracting 0.17 point in March. Employment-related indicators contributed 0.01 point to the CFNAI in April, up from –0.03 point in March. By contrast, the personal consumption and housing component subtracted 0.04 point in April, but this was smaller than the 0.06-point subtraction in March. Similarly, the sales, orders and inventories component subtracted 0.04 point in April, again smaller than the 0.10-point subtraction March.

The CFNAI Diffusion Index, which measures the breadth of movement in the component series and is also a three-month moving average, moved down to –0.19 in April from –0.12 in March. Forty of the 85 individual indicators made positive contributions to the CFNAI in April, while 45 made negative contributions. Fifty-two indicators improved from March to April, while 32 indicators deteriorated and one was unchanged. Of the indicators that improved, 23 made negative contributions.

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.

  • Sandy Batten has more than 30 years of experience analyzing industrial economies and financial markets and a wide range of experience across the financial services sector, government, and academia.   Before joining Haver Analytics, Sandy was a Vice President and Senior Economist at Citibank; Senior Credit Market Analyst at CDC Investment Management, Managing Director at Bear Stearns, and Executive Director at JPMorgan.   In 2008, Sandy was named the most accurate US forecaster by the National Association for Business Economics. He is a member of the New York Forecasters Club, NABE, and the American Economic Association.   Prior to his time in the financial services sector, Sandy was a Research Officer at the Federal Reserve Bank of St. Louis, Senior Staff Economist on the President’s Council of Economic Advisors, Deputy Assistant Secretary for Economic Policy at the US Treasury, and Economist at the International Monetary Fund. Sandy has taught economics at St. Louis University, Denison University, and Muskingun College. He has published numerous peer-reviewed articles in a wide range of academic publications. He has a B.A. in economics from the University of Richmond and a M.A. and Ph.D. in economics from The Ohio State University.  

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