The Chicago Fed Index Weakens More In April

Here’s the lead from today’s The Chicago Fed National Activity Index (CFNAI) release for April.

The index’s three-month moving average, CFNAI-MA3, declined to -0.12 in April from +0.08 in March, turning negative for the first time since December 2010. April’s CFNAI-MA3 suggests that growth in national economic activity was somewhat below its historical trend. With regard to inflation, the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year.

Production-related indicators made a contribution of -0.16 to the index in April, down sharply from +0.31 in March. Manufacturing production decreased 0.4 per cent in April after rising for nine consecutive months, and manufacturing capacity utilization declined to 74.4 per cent in April from 74.8 per cent in March. Parts shortages that resulted from the earthquakes in Japan contributed to a decline in motor vehicle and parts production. [Download News Release]

The Chicago Fed’s National Activity Index (CFNAI) is a monthly indicator designed to gauge overall economic activity and related inflationary pressure. It is a composite of 85 monthly indicators as explained in this background PDF file on the Chicago Fed’s website.

The first chart below is based on the complete CFNAI historical series dating from March 1967. The red dots show the indicator itself, which is quite noisy, and the 3-month moving average (CFNAI-MA3), which is more useful as an indicator of coincident economic activity. I’ve also highlighted official recessions.