The Chicago Fed National Activity Index (CFNAI) slipped marginally to a monthly reading of +0.02 in December from an upwardly revised +0.27 in November, the Chicago Federal Reserve reports. Today's update translates to a three-month moving average (CFNAI-MA3) of -0.11, or comfortably above the -0.70 level that's considered to be the tipping point for the onset of recessions. CFNAI, a weighted average of 85 indicators, is designed as a benchmark of U.S. economic activity broadly defined.
The December reading of the CFNAI-MA3 offers another strong signal for arguing that the U.S. economy ended 2012 in a recession-free state and that modest growth rolls on. That's been the message all along. As I noted earlier this month, business cycle risk is low, based on a broad reading of economic and financial indicators through December. That analysis has only strengthened in the two weeks since I ran the numbers. As more December data has been published, the overall trend has remained positive. Examples include the upbeat news on retail sales, industrial production, and housing starts through last month, followed by today's CFNAI release.
No one will confuse the macro trend as unusually strong, however. As the CFNAI press release notes, "economic growth moderated in December." The Chicago Fed advises that "December's CFNAI-MA3 suggests that growth in national economic activity was below its historical trend." Nonetheless, the soft trend has been enough to keep the economy out of the cyclical ditch, at least through the December, based on the numbers published to date.
The debate about January and beyond is, of course, wide open. But December's profile, and 2012's as well, shows a clear bias on the side of growth. Yes, data revisions could come back to haunt us. But at the moment, with a broad array of generally positive numbers published through the end of last year, it's reasonable to expect that any negative revisions will be marginal in terms of the broad trend.