Breaking Down the Components of the Chicago Fed National Activity Index

In the Chicago Fed update, we learned that the CFNAI fell to -0.16 in August from +0.07 in July. Two of the four broad categories of indicators used to construct the index decreased from July (production/income and consumption/housing). All four categories made negative contributions in August.

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:

Here is a close-up view since 2000:

CFNAI Component Breakdown

The next set of charts show each of the four components since 1967 with callouts for the last year. 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.

Last month, production decreased from 0.12 to -0.02. The 3-month moving average increased from -0.12 to -0.06. The average of the 3-month moving averages for the eight recessions starts is -0.05 with a range from -0.29 to 0.26. The current level is below the "recession average" and is at or below five of the eight recessions shown.

Last month, employment remained at -0.04. The 3-month moving average inched up from -0.05 to -0.04. The average of the 3-month moving averages for the eight recession starts is -0.04 with a range from -0.14 to 0.18. The current level is at the "recession average" and is at or below four of the eight recessions shown.

Last month, personal consumption dropped from 0.03 to -0.08. The 3-month moving average decreased from 0.01 to -0.02. The average of the 3-month moving averages for the eight recession starts is -0.01 with a range from -0.07 to 0.07. The current level is below the "recession average" and is at or below five of the eight recessions shown.

Last month, sales inched up from -0.04 to -0.03. The 3-month moving average fell from 0.01 to -0.03. The average of the 3-month moving averages for the eight recession starts is -0.02 with a range from -0.18 to 0.34. The current level is below the "recession average" and is at or below two of the eight recessions shown.

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

Read more updates by Jen Nash