The three-month average of the Chicago Fed National Activity Index (CFNAI) is expected to tick higher in the September update that's scheduled for tomorrow (Oct. 22), based on The Capital Spectator's average point forecast for several econometric estimates. The projection for +0.05 is slightly above August's +0.01 reading, which reflects US economic activity that's close to the historical trend rate of growth. Only negative values below -0.70 indicate an “increasing likelihood” that a recession has started, according to guidelines from the Chicago Fed. Using today's estimate for September as a guide, CFNAI's three-month average is expected to reflect an expansion that's slightly above the historical trend and therefore well above the tipping point that marks the start of a new US recession.

The Capital Spectator's average forecast is modestly above the implied 3-month average consensus forecast via Econoday.com's current survey of economists.

Here's a closer look at the numbers, followed by brief definitions of the methodologies behind The Capital Spectator's projections that are used to calculate the average forecast:

VAR-4A: A vector autoregression model that analyzes four economic time series to project the Chicago Fed National Activity Index: the Capital Spectator's Economic Trend & Momentum Indexes, the Philadelphia Fed US Leading Indicator, and the Philadelphia Fed US Coincident Economic Activity Indicator. VAR analyzes the interdependent relationships of these series with CFNAI through history. The forecasts are run in R with the “vars” package.

VAR-4B: A vector autoregression model that analyzes four economic time series to project the Chicago Fed National Activity Index: US private payrolls, real personal income less current transfer receipts, real personal consumption expenditures, and industrial production. VAR analyzes the interdependent relationships of these series with CFNAI through history. The forecasts are run in R with the “vars” package.