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Understanding the CFNAI Components

August 22, 2016

by Doug Short

The Chicago Fed's National Activity Index, which we reported on earlier today, is based on 85 economic indicators drawn from four broad categories of data:

  • Production and Income
  • Employment, Unemployment, and Hours
  • Personal Consumption and Housing
  • Sales, Orders, and Inventories

The complete list is available here in PDF format.

In this morning's Chicago Fed update, we learned that "Three of the four broad categories of indicators that make up the index increased from June, and three of the four categories made positive contributions to the index in July."

A chart overlay of the complete multi-decade span of all four categories, even if we use the three-month moving averages, is quite challenging for visual clarity:

CFNAI Components

So here is a close-up view since 2000:

CFNAI Components since 2000

But a snapshot of the 21st century contains only two recessions, so it's unclear how the individual components have behaved in during the seven recessions since the 1967 starting point for this data series.

Here is a set of charts showing each of the four components since 1967. Because of the highly volatile nature of the data, the charts are based on three-month moving averages, a smoothing strategy favored by the Chicago Fed economists. The values for the months that the NBER subsequently identified as recession starts are also indicated.

Production and Income


Personal Consumption and Housing

Sales Orders and Inventories

There's a lot to digest in the individual charts. Clearly the first two ("Production and Income" and "Employment, Unemployment and Hours") are the more volatile of the quartet. It is also obvious that "Personal Consumption and Housing" has been the biggest drag since the onset of the Great Recession. Its current level is lower than at the onset of five of the seven recessions during the history of this data series.

To close this dissection of the CFNAI components, let's reassemble them for a closer look at their collective 3-month moving averages since 2007.

CFNAI since 2007

Check back next month for a close-up look at the latest trend directions.