US National Activity Index

Consumer sentiment is greatly impacted by the jobs market and their perception of the USA economy going forward. Consumer sentiment began rising in the first two quarters but has most recently declined.

The magnitude of the surge in the stock market was a surprise to everyone. Examining the US National Activity Index helps us better understand the panic market selling in Q4 2008 and Q1 2009 followed by the biggest V-shape market bounce back from the deep dark abyss since the 1930's.


CHICAGO FED Business Activity Report-- At –0.63 in September (up from –0.96 in the previous month), the index’s three-month moving average, CFNAI-MA3, suggests that growth in national economic activity was below its historical trend. However, the CFNAI-MA3 in September improved to a level greater than –0.70 for the first time since the early months of this recession. For the four previous recessions, the first month when the CFNAI-MA3 was above –0.70 coincided closely with the end of each recession as eventually determined by the National Bureau of Economic Research (see top chart above showing the last three recessions).


The chart above shows the monthly change in the CFNAI-MA3, which has been positive for the last eight months (February through September), the first time since 1975 of eight consecutive monthly increases, and similar to the seven consecutive monthly increases from December 2001 to June 2002 that marked the end of the 2001 recession (see shaded areas).

What is the National Activity Index?

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.

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.