Chicago Fed National Activity Index Fell in January
by:Sandy Batten
|in:Economy in Brief
Summary
- Monthly index fell below zero for first time in three months.
- Three-month average rose slightly but remained below zero.
- Conclusion: economic growth is slowing to slightly below its trend but not near to a recession.
The Chicago Fed National Activity Index (CFNAI) decreased to -0.30 in January from an upwardly revised +0.02 in December (previously -0.15). This is the first negative reading on the monthly index in three months. Smoothing out the monthly volatility, the index's three-month moving average, CFNAI-MA3, increased to –0.02 in January from an upwardly revised –0.14 in December (previously -0.28). 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 readings on the 3-month average of -0.70 or below are consistent with the economy being in a recession. Therefore, even though the January reading on the 3-month average was negative, it indicates that the US economy is still growing and is well away from recessionary conditions.
Three of the four broad categories of indicators used to construct the index decreased from December, and three categories made negative contributions in January. Production-related indicators contributed –0.16 to the CFNAI in January, down from –0.08 in December. The sales, orders, and inventories category's contribution to the CFNAI was –0.04 in January, its first negative reading in three months, down from +0.05 in December. Employment-related indicators made a neutral contribution to the CFNAI in January, unchanged from December. The personal consumption and housing category’s contribution to the CFNAI was –0.10 in January, also its first negative reading in three months, down from +0.05 in December.
The CFNAI Diffusion Index, which measures the breadth of the change in the component series and is also a three-month moving average, increased to +0.03 in January, its first positive reading in six months, from –0.09 in December. A reading of zero indicates that all of the indicators are growing at their long-term average. If all of the underlying indicators in a given month are below their long-run averages, the diffusion index will equal -1. If all of the indicators are above their long-run averages, it will equal +1. In January, 26 of the 85 individual indicators made positive contributions to the CFNAI, while 59 made negative contributions. Thirty-one indicators improved from December to January, while 53 indicators deteriorated and one was unchanged. Of the indicators that improved, 14 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. 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
AuthorMore in Author Profile »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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