U.S. economic growth remained “above trend” last month, according to the Chicago Fed National Activity Index, a weighted average of 85 indicators. For the fourth consecutive month, the three-month average of the index (CFNAI-MA3) posted a reading above zero: +0.09 in February. That’s a modest slowdown from January’s revised +0.28, although the dip is in line with last week’s econometric forecast. In any case, the main takeaway is clear: recession risk was low as of last month.
The Chicago Fed recommends reading its 3-month moving average (CFNAI-MA3) as follows: a value below -0.70 after a period of economic expansion "indicates an increasing likelihood that a recession has begun." By that standard, today’s update confirms the low-recession risk signals that have persisted in the regular updates on these pages of the U.S. Economic Profile (here’s last week’s update, for instance).
The recent above-zero readings for CFNAI-MA3 contrast with the relatively weak run of updates for last year through October. Although this index reflected a slowdown in the broad economic trend for the first three quarters of 2012, CFNAI-MA3 never dipped to a recessionary signal of -0.70 or lower.
March's profile is still unknown for the most part, although there are hints that the data continues to trend positive. For instance, jobless claims have declined so far this month to levels that are close to five-year lows. Last week's update of the Macro-Markets Risk Index also suggests that the broad trend will remain positive for the near term. And last week's flash estimate of the Markit US Manufacturing PMI for March signaled a "faster manufacturing expansion" for this month. These readings hardly constitute the last word on March's economic profile, but for the moment the trend still appears to be our friend.