What is the Chicago Fed National Activity Index?
A. The index is a weighted average of 85 different indicators of economic activity, including things like industrial production and the unemployment rate. Q. The index is known as a “Goldilocks” index. What does that refer to? A. A “Goldilocks” index is an analogy we use to describe the CFNAI. What that means is a zero value of the index we call “just right” – just like in the Goldilocks story, the porridge is just right. That’s an economy growing at its historical trend rate of growth. A value that’s slightly above zero, indicating above-trend growth, that’s getting a little hot. When it gets well above zero, that’s very hot. Very hot means activity is very strong. Businesses might be having trouble finding workers, so wages are rising, or having trouble meeting demand, so prices are rising. Those levels of activity well above trend – we use those to indicate inflationary pressures. Conversely, negative values are a little cold. If you get too cold, that tends to line up with a recess
