United States - Chicago Fed National Activity Index - 3 month moving average

The Chicago Fed National Activity Index (CFNAI) is a weighted average of 85 existing monthly indicators of national economic activity 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 while a zero corresponds to growth following trend.

The economic indicators comprising the CFNAI are drawn from five broad categories of data: (1) output and income (21 series); (2) employment, unemployment and hours (24 series); (3) personal consumption, housing starts and sales (13 series); (4) manufacturing and trade sales (11 series); and (5) inventories and orders (16 series). All of the data are adjusted for inflation.

The CFNAI provides a single, summary measure of a common factor in these national economic data. As such, historical movements in this Chicago Fed index closely track periods of economic expansion and contraction, as well as periods of increasing and decreasing inflationary pressures. The Chicago Fed’s goal in releasing this index monthly is to provide an objective, real-time statistical measure of coincident economic activity derived from a wide-range of monthly economic indicators. Research studies by economists at Harvard, Princeton and the Federal Reserve Bank of Chicago have shown that this economic indicator often provides early indications of changes in inflationary pressures.

• Measurements:
  • Growth index with central value of zero (Index=0)
  • Diffusion index (Dif. Index=0)
• Cumulations:
  • 3-month moving average (3-mo. MA)
  • None
• Adjustment: Seasonally adjusted (SA)
• Native frequency: Monthly
• Start dates:
  • 1967m3
  • 1967m5 for CFNAI-MA3

The 85 economic indicators that are included in the CFNAI are drawn from four broad categories of data: production and income; employment, unemployment, and hours; personal consumption and housing; and sales, orders, and inventories. Each of these data series measures some aspect of overall macroeconomic activity. The derived index provides a single, summary measure of a factor common to these national economic data.

Intuitively, the CFNAI is the single indicator which best captures the comovement of all 85 economic indicators within a month. To the extent that all 85 series track together in a month, the degree of comovement will be high. In this case, the individual weights on each data series are relatively unimportant. But when the data point in different directions, the degree of comovement is low. In this case, the individual weights critically determine how the CFNAI resolves the conflict and reports the common element. Since the CFNAI is the first principal component of the data, the CFNAI weights are determined by the historical importance of each variable’s contribution to the overall comovement of the 85 series.

The level of the CFNAI-MA3 provides information about the likelihood of a nearterm, sustained acceleration of inflation.

How to read the index

The CFNAI is a growth index for the broad economy, sometimes called a "Goldilocks" index. A (positive, zero, negative) value indicates the economy is growing (above, at, below) trend.

Further reading

At the source:

• Background on the Chicago Fed National Activiy Index (Jul 2021, pdf)

Copyright

Source: Federal Reserve Bank of Chicago. Data provided free of charge at chicagofed.org.