Monday, August 24, 2009

From Invictus: CFNAI Update

CFNAI Update

The Chicago Fed published its National Activity Index (CFNAI) this morning, and let’s go straight to the video tape:

Click for a larger image

The 3-month moving average printed at -1.69, up from last month’s -2.18.

We’re getting there, but:

1) I would note that only once – in April 1975 – was the 3-month moving average -1.69 or worse (it was -2.24 that month) after a trough (e.g. on the upswing) with the economy out of recession. With the next print, if the trend continues, we might talk about the recession having ended this month. In the six previous recessions covered by the CFNAI, the average print in the last month of recession is -1.81, and the average in the first month of recovery (the following month) is -1.16.

2) I’m probably not alone in being worried about the sustainability of any recovery, and I’m sure the NBER is going to wait to see whether or not any recovery is, in fact, sustainable, or if we simply stagger along as various stimulants (“cash for clunkers,” the $8,000 first-time homebuyer credit) wear off.

3) Closely related to #2, I’m concerned about the consumer’s ability to re-engage and start spending on much more than necessities.

So, through my lens, another improvement, another “less bad” print, but still premature to sound the all-clear.