Commentary Directory

Chicago Fed National Activity Index: February 2024

Jacob Hess
March 25, 2024

The initial reading of the Chicago Fed National Activity Index for February pointed to a strong recovery in US economic data after a disappointing start to the year. At 0.05, the February reading was a strong 0.59 increase from the January reading of -0.54 (which was revised down from -0.30 in this release). However, because of that negative January print, the CFNAI-MA3, which is just a three-month moving average of the index, fell to -0.18 in February from -0.11 in January. Nevertheless, a total of 54 of the 85 individual indicators that make up the CFNAI improved from January while the remaining 31 deteriorated or were unchanged. Essentially, the recovery in the index was strong, and the breadth was there but not as strong.

Looking at the types of indicators, we can see that there was a robust improvement in supply conditions in the second month of the year. Production indicators made a 0.02 contribution to the headline CFNAI, up from -0.32 in January, likely boosted by the improvement in weather from January to February. The Federal Reserve noted this when manufacturing and mining production picked up 0.8% MoM and 2.2% respectively in the February IP release: “Both gains partly reflected recoveries from weather-related declines in January.” The IP report is a significant contributor to the production portion of the CFNAI.

The other two segments of the CFNAI that combined for the remaining gain were the sales, orders, and inventories indicators and the consumption and housing indicators up 0.14 to 0.02 and up 0.08 to 0.00 respectively. The latter was affected by an 0.6% MoM increase in retail sales and housing starts booming 10.7% in February. On the other hand, the sales, orders, and inventories indicator positive contribution is likely to see a revision as data for manufacturing sales and new order in February is not yet available.