Tuesday, May 26, 2020

"Chicago Fed National Activity Index suggests economic growth fell substantially in April"

by Calculated Risk on 5/26/2020 08:36:00 AM

From the Chicago Fed: Chicago Fed National Activity Index suggests economic growth fell substantially in April

Led by declines in production- and employment-related indicators, the Chicago Fed National Activity Index (CFNAI) fell to –16.74 in April from –4.97 in March. All four broad categories of indicators used to construct the index made negative contributions in April, and all four categories decreased from March. The index’s three-month moving average, CFNAI-MA3, decreased to –7.22 in April from –1.69 in March. Following a period of economic expansion, an increasing likelihood of a recession has historically been associated with a CFNAI-MA3 value below –0.70.
emphasis added
This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967.

Chicago Fed National Activity Index Click on graph for larger image.

This suggests economic activity was in a recession starting in March (using the three-month average).

According to the Chicago Fed:
The index is a weighted average of 85 indicators of growth in national economic activity drawn from four broad categories of data: 1) production and income; 2) employment, unemployment, and hours; 3) personal consumption and housing; and 4) sales, orders, and inventories.
...
A zero value for the monthly index has been associated with the national economy expanding at its historical trend (average) rate of growth; negative values with below-average growth (in standard deviation units); and positive values with above-average growth.