Chicago Fed GDP Proxy Holds Near Trend Growth
The August CFNAI three-month average settled at +0.01, indicating the U.S. economy is expanding at its historical trend rate.
Key points
- The August CFNAI three-month average settled at +0.01, indicating the economy is growing exactly at trend rate.
- Production recorded a -0.07 reading, acting as the sole negative contributor to the monthly index.
- The diffusion index held at +0.02, remaining safely above the -0.35 level associated with economic stagnation.
The Chicago Fed’s three-month average activity index closed August at +0.01. This figure places U.S. economic expansion precisely at its historical trend growth rate. The reading matched market expectations for the month.
The single-month index registered -0.04, indicating slightly below-trend performance. However, the three-month average remains the primary signal for macroeconomic direction. This metric tracks the broader economic trajectory more reliably than monthly fluctuations.
Production Drags On Monthly Activity
Production was the only category to contribute negatively in August. It recorded a reading of -0.07, down from a revised zero. Sales, orders, and inventories also slipped to exactly zero from +0.15. These components failed to provide upward momentum to the overall index.
Personal consumption and housing swung back into positive territory at +0.01. Employment also turned slightly positive at +0.01 from a previous -0.01. These improvements offset the weakness seen in the production sector. The net result kept the aggregate index near the zero line.
Indicator Breadth Remains Stable
The diffusion index edged down to +0.02 in August. This metric measures how broadly economic changes are distributed across indicators. It remains well above the -0.35 threshold historically linked to stagnation. The positive reading confirms broad-based economic participation despite the weak headline.
The index aggregates 85 distinct economic indicators into a single gauge. The report shows an 80% correlation with quarterly GDP data. TheStreet Pro notes this tool serves as a monthly proxy for U.S. growth. It provides timely data between the quarterly GDP releases.
Recession Signals Stay Dormant
A three-month average below -0.70 historically signals rising recession risk. The current +0.01 reading is far from that danger zone. This suggests the economy is not showing signs of impending contraction. The data supports a steady, if unexciting, expansionary path.
The index has a 95% accuracy rate in predicting recessions. However, it typically identifies them six to 18 months after onset. This lag limits its utility for real-time risk assessment. Investors should view the data as a confirmation of current state rather than a forecast.
