Analyzing economic activity in the United States is essential for understanding the direction of the world’s largest economy. This analysis will provide insights into key areas such as Inflation, Employment, and Industrial Activity. Studying indices allows people to forecast future economic performance and assess the impact of different socioeconomic events, such as elections or policy changes. The chart below represents my Economic Index:

The United States Economic Index

The main chart consists of a black line representing the raw values of the economic index over time, showcasing significant variability and sharp changes at certain points, such as a noticeable dip around 2020. Overlaid on this is a green smooth curve, which serves as a moving average, highlighting general trends and mitigating short-term fluctuations to reveal the broader direction of the economy. The variability in the raw index values suggests periods of economic instability or rapid changes, likely driven by significant events such as the COVID-19 pandemic in 2020. Meanwhile, the smoothed trend line indicates a gradual decline in the earlier years, stabilization mid-period, and potential recovery or steadying trend in recent years.

The Chicago Fed National Activity Index

The Chicago Fed National Activity Index (CFNAI) is a monthly economic indicator designed to gauge the overall health and direction of the U.S. economy. It combines a variety of economic data points, including production, employment, sales, and interest rates, to provide a comprehensive assessment. A positive CFNAI suggests above-average economic growth, while a negative value indicates below-average growth. A zero value signifies that the economy is expanding at its historical trend rate.

The chart below represents The Chicago Fed National Activity Index from January 2010 to September 2024, with the US Economic Index below for comparison:

The US Economic Index has more variance in dips and peaks compared to the CFNAI. The charts contradict each other, with the US Economic Index suggesting significant growth more often than the CFNAI. The correlation coefficient of the charts is 0.172, which suggests small positive correlation. This can be due to external factors having similar effects on the charts.

Closing Remarks

Forecasting economic growth is important for business, governments, and individuals around the world. Businesses can use forecasts to predict customer streams and supply chains. Governments can use forecasts to develop fiscal and monetary policies that can counter problems such as unemployment, inflation, and stagflation. While forecasts are not certain, they remain a valuable tool for understanding economies. Using historical data, economists are able to provide insights to improve all aspects of life.