Nowcasting Using the Chicago Fed National Activity Index

Abstract

The authors present an alternative version of the Chicago Fed National Activity Index (CFNAI), which is constructed using a methodology that allows for a more robust treatment of the underlying data series than its traditional methodology. This alternative CFNAI produces superior predictions of real gross domestic product growth for the current quarter (nowcasts) while correlating more closely with U.S. recessions than the traditional index.

Keywords: dynamic factor models, business cycles, nowcasting

JEL Classification: C22, C53, E27