The Chicago Fed National Activity Index (CFNAI) edged lower to –0.11 in February
from –0.10 in January. Two of the four broad categories of indicators that make
up the index decreased from January, and two of the four categories made negative contributions to the index in February. – Chicago Fed National Activity Index
The Chicago Fed National Activity Index is a weighted index of 85 monthly indicators of national activity index. It measures 1) production and income; 2) employment, unemployment and hours; 3) personal consumption and housing; and 4) sales, orders and inventories. As you can see, it is comprehensive nothwithstanding the fact that it is subject to data sampling and statistical modelling error.
The CFNAI declined to -.11 in February from -.1 in January. What is significant about this is that January was originally reported to be +.13 and the expectation for February was +.10. It was the third miss of expectations in a row. It was the 3rd month in a row of below trend “growth,” which is the worst run since mid-2011.
Perhaps the biggest indicator of economic weakness gripping our system is the fact that the personal consumption and housing category decreased to -.17 in February from -.07 in January. Given that consumption is close to 70% of the GDP, this metric would indicate a far weaker economy than the political/business leaders would have us want to believe.
Furthermore, in what is an indication of far greater overall weakness in the consumption/housing, some of the other component indices were slightly positive. Because this is a weighted index, it would suggest that consumption/housing is far weaker than is measured by the Chicago Fed.
The stock market is headed for a serious downside “adjustment.” It seems that as the economic and geopolitical news grows worse by the day, the Fed/Government works even harder to pump up the stock market.
In a sense, the Fed has no choice. Every single public and private pension fund – on a true mark to market basis – is hopelessly underfunded. The stock allocation component of most of them is now over 40%. If Fed/Treasury (Exchange Stabilization Fund) were to step away and the let the market trade freely, the U.S. pension system would collapse.