by Calculated Risk on 2/22/2010 08:33:00 AM

Note: This is a composite index based on a number of economic releases.

From the Chicago Fed: Index shows economic activity increased sharply in January

The Chicago Fed National Activity Index was +0.02 in January, up from –0.58 in December. ...

The index’s three-month moving average, CFNAI-MA3, increased to –0.16 in January from –0.47 in December, reaching its highest level since July 2007. January’s CFNAI-MA3 suggests that, consistent with the early stages of a recovery following a recession, growth in national economic activity is beginning to near its historical trend. With regard to inflation, the amount of economic slack reflected in the CFNAI-MA3 indicates subdued inflationary pressure from economic activity over the coming year.

Production-related indicators made a positive contribution to the index for the seventh consecutive month. As a group, they contributed +0.45 in January, up from +0.14 in December. ...

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This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967. According to the Chicago Fed:

A CFNAI-MA3 value below –0.70 following a period of economic expansion indicates an increasing likelihood that a recession has begun. A CFNAI-MA3 value above –0.70 following a period of economic contraction indicates an increasing likelihood that a recession has ended. A CFNAI-MA3 value above +0.20 following a period of economic contraction indicates a significant likelihood that a recession has ended.

Although the CFNAI-MA3 improved in January, the index is still negative. According to Chicago Fed, it is still too early to call the official recession over - although the likelihood that a recession has ended is increasing.