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Chicago Fed National Activity Index Suggests Growth Decreased Substantially in March
Led by declines in production- and employment-related indicators, the Chicago Fed National Activity Index (CFNAI) fell to –4.19 in March from +0.06 in February. All four broad categories of indicators used to construct the index made negative contributions in March, and three of the four categories decreased from February. The index’s three-month moving average, CFNAI-MA3, decreased to –1.47 in March from –0.20 in February. Following a period of economic expansion, an increasing likelihood of a recession has historically been associated with a CFNAI-MA3 value below –0.70.
The CFNAI Diffusion Index, which is also a three-month moving average, moved down to –0.32 in March from –0.21 in February. Eighteen of the 85 individual indicators made positive contributions to the CFNAI in March, while 65 made negative contributions and two made neutral contributions. Twenty-two indicators improved from February to March, while 63 indicators deteriorated. Of the indicators that improved, nine made negative contributions.
Production-related indicators contributed –2.72 to the CFNAI in March, down from +0.06 in February. Industrial production decreased 5.4 percent in March after increasing 0.5 percent in February. The contribution of the sales, orders, and inventories category to the CFNAI ticked up to –0.05 in March from –0.06 in February.
Employment-related indicators contributed –1.23 to the CFNAI in March, down from +0.07 in February. Nonfarm payrolls fell by 701,000 in March after increasing by 275,000 in February, and the unemployment rate increased to 4.4 percent in March from 3.5 percent in the previous month. The contribution of the personal consumption and housing category to the CFNAI decreased to –0.19 in March from –0.02 in February. Housing starts decreased to 1,216,000 annualized units in March from 1,564,000 in the previous month.
The CFNAI was constructed using data available as of April 16, 2020. At that time, March data for 50 of the 85 indicators had been published. For all missing data, estimates were used in constructing the index. The February monthly index value was revised to +0.06 from an initial estimate of +0.16, and the January monthly index value was revised to –0.27 from last month’s estimate of –0.33. Revisions to the monthly index can be attributed to two main factors: revisions in previously published data and differences between the estimates of previously unavailable data and subsequently published data. The revision to the February monthly index value was primarily due to the former, while the revision to the January monthly index value was primarily due to the latter. In addition, this month the method to impute missing values was improved; for more details, see p. 7 of the background information document at chicagofed.org/cfnai.
Posted: April 20, 2020 Monday 08:30 AM