Chicago Fed CFNAI Update
The Chicago Fed’s National Activity Index (CFNAI) — the best economic indicator you’ve never heard of — printed this morning.
The folks at the Chicago Fed say:
Month-to-month movements can be volatile, so the index’s three-month moving average,the CFNAI-MA3, provides a more consistent picture of national economic growth.
A CFNAI-MA3 value above –0.70 following a period of economic contraction indicates an increasing likelihood that a recession has ended. A CFNAI-MA3 value above +0.20 following a period of economic contraction indicates a significant likelihood that a recession has ended.
The 3MA moved above -0.70 in September of last year, then moved back below momentarily, and has been above since November. A print at or above +0.20 still seems a bit distant.
Here’s the CFNAI-MA3 (which printed at -0.18, up ever so slightly from last month’s -0.31):
From the release:
Led by improvements in production- and employment-related indicators, the Chicago Fed National Activity Index increased to –0.07 in March, up from –0.44 in February. Three of the four broad categories of indicators that make up the index made positive contributions in March, while the consumption and housing category made the lone negative contribution.
The index’s three-month moving average, CFNAI-MA3, increased to –0.18 in March from –0.31 in February. March’s CFNAI-MA3 suggests that growth in national economic activity, while still below average, continues to improve. With regard to inflation, the amount of economic slack reflected in the CFNAI-MA3 indicates subdued inflationary pressure from economic activity over the coming year.
While the improvement is certainly welcome, I would caution that the Consumption and Housing sub-component remains mired in negative territory:
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April 29th, 2010 at 10:59 am
Car production must be the biggest element in the indes, looks like cars sales were up modestly and the midwest plants must be filling the pipeline – at least a little bit for spring & summer sales.
Cars have a finite life
April 29th, 2010 at 11:18 am
Wow, that sure is some impressive “recovery” based on these metrics. Color me unimpressed.
April 29th, 2010 at 11:31 am
That’s an excellent post. Thank you. It sums up nicely the current economic situation: improvement but still weak.
April 29th, 2010 at 11:40 am
Invictus, can you send me your email contact to my TBP account email address? I’ve been doing some amateur screwing around with unemployment data that you would be much better at than I am.
April 29th, 2010 at 11:54 am
Get the party hats out!
April 29th, 2010 at 12:02 pm
As I was saying before you can’t claim recovery until consumer spending shows some continuous months of growth. Absent that all you have is treading water and hoping you don’t drown.
April 29th, 2010 at 12:18 pm
The “new normal” = flatlined. Get used to it.
April 29th, 2010 at 12:52 pm
Transor — send it to me and I will forward
April 29th, 2010 at 1:14 pm
[...] The Chicago Fed National Activity Index slowly recovers. (Calculated Risk, Big Picture) [...]
April 29th, 2010 at 4:01 pm
Those numbers just don’t blow up the old skirt, eh? I’m sure the White House is already painting the picture of “Prosperity is just around the corner!” Unfortunately, we live on a circle.
April 29th, 2010 at 9:07 pm
“A CFNAI-MA3 value above –0.70 following a period of economic contraction indicates an increasing likelihood that a recession has ended. ”
they only began slipping that definition in a couple of months ago:
http://www.wildebeests.net/2010/03/01/the-chicago-fed-and-definition-change-for-the-cfnai/
a cynic might say that it was needed because +0.2 is not going to happen any time soon given the consumption and housing component of the index.
April 29th, 2010 at 9:40 pm
@wildebeest
Great post. Thanks for pointing it out.
April 30th, 2010 at 1:01 am
I’m not a technician, at most I’m a jackass, but can you see a series of lower highs in this chart? I also see some assymetry to the downside. On a super statistic like this one based around mean trend growth, we can see that even though we spend more time above mean trend growth, the occurrences below mean trend growth are more significant. Is it worthwhile betting on a little above trendline growth when we aren’t even there yet and the down drafts are so costly?
Hat Tip: “Fooled by Randomness”, Taleb, Chapter Six: “Skewness and Asymmetry”