Chicago Fed National Financial Conditions Index – Recession Signal

Today’s release of the Chicago Fed National Financial Conditions Index (NFCI) shows pretty clearly that financial conditions are quickly becoming stressed with the index reading 0.012, the first positive value since the panic that ensued in March 2020 due to COVID-19 but, more importantly, the first notable positive reading since the period surrounding the mop-up of the Great Recession.

The NFCI provides a comprehensive weekly update on U.S. financial conditions in money markets, debt and equity markets and the traditional and “shadow” banking systems. Positive values indicate financial conditions that are tighter than average, while negative values indicate financial conditions that are looser than average.

A key component of this data-set, the “adjusted” index, isolates a component of financial conditions uncorrelated with economic conditions to provide an update on how financial conditions compare with current economic conditions.

The following data visualization (click for dynamic view) shows the Chicago Fed “Adjusted” National Financial Conditions Index since mid-2007 as well as recession bands denoting the start and end of the “Great Recession” and the “Mini-Recession” that occur following the COVID-19 panic.