Chicago Fed National Activity Index: A More Complete Economic View

GDP, unemployment and interest rates. At times, it can seem these are the only economic factors anyone pays attention to. However, the Chicago Fed has created the National Activity Index, which takes into account over 85 disparate variables that combine to show one broad view of the economy's health - and it usually comes out before GDP calculations do.

Think of this viz like the road the economy is on. In the middle is the road, a band of green. When the red line (NAI 3 month moving average) is within the road, things are humming along smoothly. However, as soon as it swerves off to the side (last year?), the road gets bumpier.

When the line drops below -.7, it is likely that the following months will be recessionary. When the line rises above .7, it is likely that the economy will be inflationary and/or overheat, like in the 1970s. One thing is for sure, the economy must be a hard car to drive!

Constructing this viz was somewhat difficult because reading it requires perspective to understand. The NAI is normally displayed as a simple line graph. Without reference to what the line means though it is a useless view to the uninitiated (even with words to explain it). By using red reference bands for recessions, and a green band for the "healthy economy", viewers visually recognize and associate the green with "good" and the red with "bad". Although they might not understand the entire metric, they know that the viz is about the economy and that it was doing well during the 90's and has been doing poorly for the past year or so.

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