Chicago Fed National Activity Index Fell in October
by:Sandy Batten
|in:Economy in Brief
Summary
- The monthly index fell to -0.49 in October with the 3-month average falling to -0.22.
- This indicates that the economy grew slower than its longer-term trend.
- All four major categories made negative contributions.
- However, the October value is still well above the -0.70 value that historically has been associated with recession.
The Federal Reserve Bank of Chicago reported that its National Activity Index (CFNAI) fell to -0.49 in October versus a downwardly revised -0.02 in September (initially +0.02). All four broad categories of indicators used to construct the index decreased from September, and all four categories made negative contributions in October. The monthly index has been negative in five of the past six months. The October reading was constructed using data available as of November 17, 2023. At that time, October data for 50 of the 85 indicators had been published. For all missing data, estimates were used in constructing the index.
Smoothing out monthly volatility, the index's three-month moving average fell to -0.22 in October from zero in September. 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 average readings of -0.70 or below are consistent with the economy being in a recession.
The monthly figures in October reflected a deterioration in each of the four component series. Production-related indicators contributed –0.33 to the CFNAI in October, down from –0.04 in September. The contribution of the sales, orders, and inventories category to the CFNAI edged down to –0.04 in October from a neutral value in September. Employment-related indicators contributed –0.10 to the CFNAI in October, down from +0.01 in September. The unemployment rate increased to 3.9% in October from 3.8% in the previous month. The contribution of the personal consumption and housing category to the CFNAI ticked down to –0.02 in October from a neutral value in September.
The CFNAI Diffusion Index, which measures the breadth of change in the component series and is also a three-month moving average, fell to –0.20 in October from +0.08 in September. A reading of zero indicates that all of the indicators are growing at their long-term average. In October, twenty-four of the 85 individual indicators made positive contributions to the CFNAI, while 61 made negative contributions. Twenty-seven indicators improved from September to October, while 58 indicators deteriorated. Of the indicators that improved, nine 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
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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