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Economy in Brief

Chicago Fed Index Recovers Modestly
by Tom Moeller   November 22, 2010

The Chicago Fed National Activity Index (CFNAI) improved last month to its highest level since August. Regardless, the index remained down sharply since its March peak, suggesting that the economy's recovery has lost forward momentum. The m/m gain to -0.28 was from an upwardly revised -0.52 during September. The three-month moving average of the index, which smoothes out some of the series' volatility, deteriorated to -0.46, its lowest level since November of last year.

An index level at or below -0.70 typically has indicated negative U.S. economic growth. A zero value of the CFNAI suggests that the economy is expanding at its historical trend rate of growth. During the last ten years it's had a 78% correlation with the quarterly growth in real GDP.

The CFNAI is a weighted average of 85 indicators of economic activity. The Chicago Fed indicated that October improvement resulted from increases in the labor market indicators as well as the production and income measures. The other component series were roughly stable. Forty-one of the 85 individual indicators made positive contributions to the index in October, while 44 had a negative effect. The Fed also indicated that 45 indicators improved from September to October, while 39 indicators deteriorated and one was unchanged.

In a separate survey, the Chicago Fed indicated that its Midwest manufacturing index during September held roughly steady m/m but that was down slightly from its July high, its highest since December 2008. Indicators for the steel and machinery sectors fell but autos and the resource sector rose. The Chicago Federal Reserve figures are available in Haver's SURVEYS database.

Rebalancing the Global Recovery is Friday's speech by Fed Chairman Ben S. Bernanke and it can be found here.


Chicago Federal Reserve Bank Oct Sep Aug Oct'09 2009 2008 2007
CFNAI -0.28 -0.52 -0.57 -0.65 -0.86 -1.85 -0.29
 3-Month Moving Average -0.46 -0.33 -0.35 -0.68 -- -- --
  Personal Consumption &
-0.43 -0.41 -0.37 -0.41 -0.44 -0.29 -0.09
  Employment, Unemployment &
0.03 -0.06 -0.07 -0.54 -0.78 -0.67 -0.14
  Production & Income 0.08 -0.12 -0.04 0.06 -0.21 -0.60 -0.05
  Sales, Orders & Inventories 0.05 0.08 -0.10 0.05 -0.11 -0.28 -0.03


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