Chicago Fed National Activity Index Increases in March
by:Tom Moeller
|in:Economy in Brief
Summary
- Index is positive for second straight month.
- Three-month average remains negative.
- Improvement led by labor market indicators.
The Chicago Fed National Activity Index (CFNAI) rose 0.15 in March from 0.09 in February, revised from to 0.05. The index reached a four- year low of -0.81 in January. Smoothing out the monthly volatility, the index's three-month moving average rose to -0.19 from a downwardly revised -0.28 in February.
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 three-month average of -0.70 or below are consistent with the economy being in a recession. As a result, the three-month reading in March indicates that the US economy is on a positive growth path.
Movement in the four broad categories of indicators used to construct the index was mixed in March versus February. Production-related indicators contributed 0.11 point to the CFNAI in March after adding 0.13 in February. These were improved from a 0.39 January subtraction. The employment, unemployment & hours series added 0.04 point after subtracting 0.01 point in February. This was the first positive reading since November of last year. The sales, orders and inventories category held steady after subtracting 0.05 from the CFNAI one month earlier. The personal consumption and housing category’s contribution to the CFNAI eased to a 0.01 point subtraction after adding 0.02 in February.
The CFNAI Diffusion Index, which measures the breadth of the change in the component series and is also a three-month moving average, rose to -0.06 in March from -0.16 in February. It was the sixth consecutive reading in negative territory. 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 March, 50 of the 85 individual indicators made positive contributions to the CFNAI, while 35 made negative contributions. Fifty indicators improved from February to March, while 35 indicators deteriorated. Of the indicators that improved, 16 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.
Generative AI: A Turning Point for Labor's Share? From the Federal Reserve Bank of Philadelphia can be found here.
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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