How to predict a recession 101
Today鈥檚 release of the indicated that national economic activity weakened notably in August with the index declining to -0.53 from a revised -0.11 in July while the three month moving average declined to -0.42.
The CFNAI is a weighted average of 85 indicators of national economic activity collected into four overall categories of 鈥減roduction and income鈥�, 鈥渆mployment, unemployment and income鈥�, 鈥減ersonal consumption and housing鈥� and 鈥渟ales, orders and inventories鈥�.
The Chicago Fed regards a value of zero for the total index as indicating that the national economy is expanding at its historical trend rate while a negative value indicates below average growth.
A value at or below -0.70 for the three month moving average of the national activity index (CFNAI-MA3) indicates that the national economy has either just entered or continues in recession.
It鈥檚 important to note that at -0.42 the current three month average index value is indicating extremely weak growth near the recessionary level of -0.70.
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