The Chicago Fed National Activity Index (CFNAI) isn’t the most widely followed economic indicator, and in more recent history has also been one of the least volatile. The index is released monthly and consists of a weighted average of 85 different monthly economic indicators that measure economic activity on a national basis. When the index is above average, it indicates that economic activity is growing above trend, while negative readings indicate below trend growth.
We will have a full breakdown of today’s release later on in today’s Closer report, which you can view by starting a two-week free trial to our premium research, but for now, we wanted to highlight a number of notable trends from this month’s report. As shown in the table to the right, July’s report came in at a level of +0.2687 versus consensus expectations of +0.2. This month’s better than expected report was the first time that we have seen back to back reports exceed expectations since last July. Not only that, but it was also the first time in a year that we have seen two straight positive, or above trend growth, readings. Not to get ahead of ourselves here, but if next month’s report also exceeds expectations, it would be the longest streak of better than expected reports since November 2009, and if it’s positive it would be the first ‘three-peat’ of above trend readings since the end of 2014.
The chart below is a long-term look at the CFNAI index going back to 1980. We have also included gray shading to indicate recessions. As shown in the chart, heading into prior recessions, the CFNAI was typically trending lower well ahead of the recession. In the current period, the CFNAI had been trending slightly lower since the start of 2015. With the last two reports, however, that string of lower highs appears to have been broken providing further confirmation that the ‘growth scare’ of 2015 was just that and nothing more dire.