Foreword: The Chicago Fed National Activity Index has an excellent record for signaling the economic downturns associated with negative GDP and recessions. A decline in its 3-month moving average (MA) below the -0.7 level raises a warning that a recession may have begun. The latest update shows the seventh month of negative growth in the 3-month MA, but the contraction is defintitely easing. The latest level of -0.22 for the 3-MA is well above the recession warning level.
Here's the lead from today's CFNAI release for December.
Led by gains in employment- and production-related indicators, the Chicago Fed National Activity Index increased to +0.03 in December from -0.40 in November. December marked the first time in five months that the index had a positive reading. Three of the four broad categories of indicators that make up the index made positive contributions in December, while the consumption and housing category continued to make a large negative contribution.
The index's three-month moving average, CFNAI-MA3, increased to -0.22 in December from -0.36 in November. The CFNAI-MA3 suggests that despite the improvement in December, growth in national economic activity remained below its historical trend for the seventh consecutive month. With regard to inflation, the amount of economic slack reflected in the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year.
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