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Economy in Brief

Chicago Fed Nat'l Activity Index Turns Positive in July
by Tom Moeller  August 22, 2022

• Each of the four components rise.

• Three-month average remains negative.

The Federal Reserve Bank of Chicago reported that the Chicago Fed National Activity Index (CFNAI) increased during July to 0.27 from -0.25 during June, revised from -0.19. It was the first positive reading in three months.

The index's three-month moving average in July held steady with June at -0.09 after deteriorating to a negligible +0.06 in May. It was the second 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.

Each of the major components of the index were positive last month. The Production & Income reading of 0.16 last month compared to -0.19 in June and -0.18 in May. Still, it remained below 0.19 in April. The Employment, Unemployment & Hours component rose to 0.09 from 0.00. It was the highest level since March. Sales, Orders and Inventories moved to 0.01 from -0.06. It was the first positive reading in six months. The Personal Consumption & Housing index of 0.01 in July compared to 0.00 in June, up from -0.07 in May.

The diffusion index, which measures the breadth of movement in the component series, rose to -0.05 during July from -0.08 in June. These readings compare to 0.34 in April. Fifty-five of the components contributed positively to the July index while 30 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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