Chicago Fed National Activity Index: A More Complete Economic View

on February 2, 2010

GDP, unemployment and interest rates. At times, it can seem these are the only economic factors anyone pays attention to. However, the Chicago Fed has created the National Activity Index, which takes into account over 85 disparate variables that combine to show one concrete view of the economies health - and it comes out months before GDP calculations usually do.

Think of this viz like the road the economy is on. In the middle is the road, a band of green. When the red line (NAI 3 month moving average) is within the road, things are humming along smoothly. However, as soon as it swerves off to the side (last year?), problems happen.

When the line drops below -.7, it is likely that the following months will be recessionary. When the line rises above .7, it is likely that the economy will be inflationary and perhaps overheat, like in the 1970s. One thing is for sure, the economy must be a hard car to drive!