September economic activity: What does it mean for the recovery?

If economic activity continues its present course, we're headed for a double-dip recession.

This chart of the Chicago Federal Reserve National Activity Index shows that the Index (blue line) dropped again in September to -0.58, while the three month moving average (black line) declined to -0.33. If the black line drops to -0.7, it indicates a recession.

SoldAtTheTop / Paper Economy

October 28, 2010

Today’s release of the Chicago Federal Reserve National Activity Index (CFNAI) indicated that national economic activity weakened notably again in September with the index declining to -0.58 from August while the three month moving average declined to -0.33.

The CFNAI is a weighted average of 85 indicators of national economic activity collected into four overall categories of “production and income”, “employment, unemployment and income”, “personal consumption and housing” and “sales, orders and inventories”.

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’s important to note that at -0.33 the current three month average index value is indicating extremely weak growth nearing the recessionary level of -0.70.

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