Understanding The CFNAI Components - Monday, Feb. 25

The Chicago Fed's National Activity Index, which we reported on this morning, 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 "The CFNAI Diffusion Index, which is also a three-month moving average, decreased slightly to +0.09 in January from +0.18 in December. Thirty-five of the 85 individual indicators made positive contributions to the CFNAI in January, while 50 made negative contributions. Thirty-eight indicators improved from December to January, while 46 indicators deteriorated and one was unchanged. Of the indicators that improved, 11 made negative contributions."

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:

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CFNAI Components

So here is a close-up view since 2000:

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CFNAI Components since 2000

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.

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Production and Income

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Personal Consumption and Housing

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Sales Orders and Inventories

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.

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CFNAI since 2007

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