The three-month average of the Chicago Fed National Activity Index (CFNAI) is expected to rise slightly to +0.37 in the January update that’s scheduled for release on Monday (Feb. 24), according to The Capital Spectator’s median econometric forecast. In the previous release for December, the three-month average was +0.33, a reading that equates with economic expansion. Only values below -0.70 indicate an “increasing likelihood” that a recession has started, according to guidelines from the Chicago Fed. Based on today’s estimate for January, CFNAI’s three-month average is projected to remain at a level that’s historically associated with growth, and at a rate that’s moderately above trend.
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The economic news for the US has been disappointing in recent weeks, although yesterday’s updates on jobless claims and the manufacturing sector offer a brighter view. Nonetheless, it’s easy to assume that the business cycle is faltering, based on weak numbers for housing starts, retail sales, payrolls and personal income in the latest releases. But when you step back and consider the broad trend based primarily on year-over-year changes, there’s still no overt sign that the economy is deteriorating. A diversified set of 14 economic and financial indicators still point toward growth. This view via the data offers yet another reminder that it’s dangerous to draw hard and fast conclusions about the state of macro from a handful of numbers using monthly comparisons.
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