November Chicago Fed National Activity Index

Like many of the indicators we watch, the November iteration of the Chicago Fed National Activity Index (CFNAI) illustrates an economy that is improving. The monthly reading jumped to 0.6 after the prior period was upwardly revised to minus 0.07 from an initial reading of minus 0.18. With the most recent tally, the three month average also moved further into positive territory at 0.25 from a revised 0.12 (originally 0.06).

The positive components were rather pervasive. A majority of the segments (56 out of 85) made positive contributions to the indicator. Of all the components, 54 were better than the month before while just 30 deteriorated. Employment and production were areas of strength. Labor markets have continued to improve as the unemployment rate has fallen, nonfarm payroll figures grew, and jobless claims have eased. Production contributed the most to the overall tally with industrial output and capacity utilization improving in the period.

Atlas likes this indicator because it incorporates 85 different components in an attempt to represent the direction of the economy each month accurately. A reading above zero suggest the country is growing above its historical trend, but the monthly readings tend to be volatile, so Atlas pays most attention to the three-month moving average; its current reading is the highest since February 2012. The improvement in this broad indicator resonates with the central bank’s decision to slow the amount of support it is providing the economy each month via Quantitative Easing. (by C. Cox)