Picture du Jour: Keep an eye on Chicago Fed Activity Index

The Chicago Fed National Activity Index (CFNAI) is a US economic indicator that receives less publicity that others, but is worth keeping an eye on. According to the Chicago Fed, “when the three-month moving average of the CFNAI moves above -0.7 following a period of economic contraction, there is an increasing likelihood the recession has ended.”  The three-month moving average of the CFNAI has held above -0.70 since November 2009.

Interestingly, when plotting the Chicago Fed series together with US real GDP growth (courtesy of Agora Financial), the relationship would indicate growth of 3-4% for 2010 – a higher number than that forecast by most economists. I will be paying close attention to the February number due out on March 22.

Source: Agora Financial’s 5 Minute Forecast, March 2, 2010.

Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.