Chicago Fed Indices Provide Insight into Economic Conditions


The Chicago Federal Reserve Bank publishes two indices – the National Financial Conditions Index (NFCI) and the adjusted National Financial Conditions Index – that provide reliable measures of financial conditions to policymakers and market participants who are looking for guidance on the state of the economy. Because U.S. economic and financial conditions tend to be highly correlated, these two indices move with the business cycle and the level of inflation.

The NFCI provides a comprehensive weekly update on U.S. financial conditions based on 105 measures of financial activity. These break down into three sub-indices, Risk, Credit, and Leverage. The NFCI accounts for conditions in money markets, debt and equity markets, and the traditional and “shadow” banking systems, using weekly, monthly, and quarterly data. In constructing the index, the Chicago Fed weights them by their relative importance in explaining the index’s historical fluctuations.

The adjusted NFCI, or ANCFI, is constructed to account for prevailing macroeconomic conditions as measured by the Chicago Fed National Activity Index (CFNAI) and the Personal Consumption Expenditures (PCE) Price Index. As such, it isolates a financial-only element of conditions, adjusts for the state of the business cycle and the level of inflation. As the Chicago Fed notes, “if …economic growth were weaker than average, as during a recession, financial conditions would be expected to be tighter than average as a result…Thus, positive values of the ANFCI have been historically associated with financial conditions that are tighter than what would be typically suggested by growth in economic activity and inflation, while negative values have been historically associated with the opposite.”

Looking at these indices, they appear to reflect the business cycle well. As shown below, both the NFCI and the ANFCI having strong negative inflection points in mid-2007. This was several months prior to the start of the 2007-09 recession, which officially started in December 2007, suggesting that these figures comprise a leading economic indicator.


The current figure for the NFCI is negative, suggesting looser-than-average financial conditions, with the ANFCI also suggesting that financial conditions are looser than average historically, but slightly less so than the NFCI after accounting for prevailing macroeconomic conditions, including current levels of economic growth and inflation.

More information on these indices in available at

Contact ACA’s Allen Irish for more information.