The three-month average of the Chicago Fed National Activity Index (CFNAI) is expected to decline incrementally to -0.21 in tomorrow’s December update, according to The Capital Spectator’s average econometric forecast. That’s virtually unchanged from CFNAI’s -0.20 three-month average for November. The consensus forecast of economists calls for a slightly higher reading of -0.09 in the December report. A value below -0.70 indicates an “increasing likelihood” that a recession has started, the Chicago Fed advises.

Here’s a closer look at the numbers, followed by brief definitions of the methodologies behind The Capital Spectator’s projections:

VAR-4A: A vector autoregression model that analyzes four economic time series to project the Chicago Fed National Activity Index: the Capital Spectator Economic Trend Index, the Capital Spectator Economic Momentum Index, the Philadelphia Fed US Leading Indicator, and the Philadelphia Fed US Coincident Economic Activity Indicator. The forecasts are run in R with the “vars” package.
VAR-4B: A vector autoregression model that analyzes four economic time series to project the Chicago Fed National Activity Index: US private payrolls, real personal income less current transfer receipts, real personal consumption expenditures, and industrial production. The forecasts are run in R with the “vars” package.
ARIMA: An autoregressive integrated moving average model that analyzes the historical record of the Chicago Fed National Activity Index in R via the “forecast” package.
ES: An exponential smoothing model that analyzes the historical record of the Chicago Fed National Activity Index in R via the “forecast” package.