Understanding The CFNAI Components
Doug Short | Feb 24, 2015 12:22AM ET
The Chicago Fed's National Activity Index, which I reported on earlier today, is based on 85 economic indicators drawn from four broad categories of data:
|
The complete list is available here in PDF format.
In today's Chicago Fed update, we learned that three of the four broad categories of indicators that make up the index increased from December, and only one of the four categories made a negative contribution to the index in January. Let's now take a look at the historical context, focusing on the less volatile 3-month moving average of the components.
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:
So here is a close-up view since 2000:
But a snapshot of the 21st century contains only two recessions, so it's unclear how the individual components have behaved in during the seven recessions since the 1967 starting point for this data series.
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. I've also highlighted the values for the months that the NBER subsequently identified as recession starts.
Get The News You Want
There's a lot to digest in the individual charts. Clearly the first two (Production and Income and Employment, Unemployment and Hours) are the more volatile of the quartet. It is also obvious that Personal Consumption and Housing has been the biggest drag since the onset of the Great Recession. In fact, if I use the Excel default vertical axis (optimized for the data) rather than using the same vertical scale for all four components, the sustained lethargy of this CFNAI component is quite dramatic. We can readily see that it's the chronic outlier in the quartet.
I'll close this dissection of the CFNAI components by reassembling them for a closer look at their collective 3-month moving averages since 2007.
Check back next month for a close-up look at the latest trend directions.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.