Chicago Fed National Index: “On The Edge”


Here it comes:

The index’s three-month moving average, CFNAI-MA3, decreased from –0.36 in September to –0.56 in October — its eighth consecutive reading below zero. October’s CFNAI-MA3 suggests that growth in national economic activity was below its historical trend.

Now here’s the sidebar….

When the CFNAI-MA3 value moves below –0.70 following a period of economic expansion, there is an increasing likelihood that a recession has begun.


Not “will begin”, has begun.

The problem with this indicator is that it has less predictive value than you’d like; it is more of a coincident indicator than anything else.  On the other hand, the Fed Indices I use, when they show a three-month or longer trend of negative prints, tend toindicate recession is inbound.

Take the two together and you’ve got trouble — and in that regard, we’re right on the edge.  The trend is not only down it looks a lot like the 2001 and 2008 time frames, as we were heading lower and about to “formally recognize” economic trouble.

We’ll get more data this week, but this is not a positive print at all.

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