Monday, September 27, 2010

Chicago Fed Index Nears Double Dip Recession Signal

The Chicago Federal Reserve's National Activity Index weakened again.

Led by declines in production- and employment-related indicators, the Index decreased to –0.53 in August from –0.11 in July. It was downhill acroos the board. None of the four broad categories of indicators that make up the index made a positive contribution in August.

The index’s three-month moving average, CFNAI-MA3, declined to –0.42 in August from –0.27 in July.

The index is a weighted average of 85 indicators of national economic activity. The indicators are drawn from four broad categories of data: 1) production and income; 2) employment, unemployment, and hours; 3) personal consumption and housing; and 4) sales, orders, and inventories.

According to the Chicago Fed, when the CFNAI-MA3 value moves below –0.70 following a period of economic expansion, there is an increasing likelihood that a recession has begun.

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