Economy: Chicago Fed National Activity Index (CFNAI) for December 2021

The Federal Reserve Bank of Chicago released its National Activity Index (CFNAI) for December 2021:

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Predicted: +0.10

Actual (CFNAI): -0.15

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Previous Month (revised): +0.44

3-Month Moving Average (CFNAI-MA3): +0.33

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The CFNAI is a weighted average of 85 indicators of growth in national economic activity drawn from four broad categories of data:

Production and income;
Employment, unemployment, and hours;
Personal consumption and housing; and
Sales, orders, and inventories.

The "predicted" figure is what economists were expecting, while the yellow-highlighted figure is what was reported.

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CHART: Chicago Fed National Activity Monthly Index
December 2021 Update

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CHART: CFNAI-MA3 with Business Cycles
December 2021 Update

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From Today's Report

"...Index Suggests Economic Growth Declined In December

Led by declines in production-related indicators, the Chicago Fed National Activity Index (CFNAI) fell to –0.15 in December from +0.44 in November. Two of the four broad categories of indicators used to construct the index made negative contributions in December, and all four categories deteriorated from November. The index’s three-month moving average, CFNAI-MA3, moved down to +0.33 in December from +0.40 in November..."

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Understanding The CFNAI:

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.

Periods of economic expansion have historically been associated with values of the CFNAI-MA3 above -0.70 and the CFNAI Diffusion Index above -0.35. Conversely, periods of economic contraction have historically been associated with values of the CFNAI-MA3 below -0.70 and the CFNAI Diffusion Index below -0.35.

An increasing likelihood of a period of sustained increasing inflation has historically been associated with values of the CFNAI-MA3 above +0.70 more than two years into an economic expansion. Similarly, a substantial likelihood of a period of sustained increasing inflation has historically been associated with values of the CFNAI-MA3 above +1.00 more than two years into an economic expansion.

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