Chicago Fed Index

Every month Steel Market Update reviews the Chicago Federal Reserve statement known as the Chicago Fed National Activity Index. We supply our members an analysis of the data which are shown below.

The index is a weighted average of 85 indicators of national economic activity drawn from four broad categories of data:

1) production and income
2) employment, unemployment, and hours
3) personal consumption and housing
4) sales, orders, and inventories.

A zero value for the index indicates that the national economy is expanding at its historical trend rate of growth; negative values indicate below-average growth; and positive values indicate above-average growth.

When the CFNAI-MA3 (three month moving average) value moves below -0.70 following a period of economic expansion, there is an increasing likelihood that a recession has begun. Conversely, when the CFNAI-MA3 value moves above -0.70 following a period of economic contraction, there is an increasing likelihood that a recession has ended. When the CFNAI-MA3 value moves above /+0.70 more than two years into an economic expansion, there is an increasing likelihood that a period of sustained increasing inflation has begun.

The CFNAI has been a reasonably good leading indicator for steel demand with a lead time of about six months.

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