The 2001 Recession and the Chicago Fed National Activity Index: Identifying Business Cycle Turning Points

On March 5, 2001, the Federal Reserve Bank of Chicago first released publicly the Chicago Fed National Activity Index (CFNAI), a single, summary measure of real economic activity that is based on a weighted average of 85 economic indicators. This inaugural CFNAI release explicitly mentioned the possibility that the U.S. economy had begun to slip into a recession. On November 26, 2001, the National Bureau of Economic Research’s (NBER) Business Cycle Dating Committee “determined that a peak in business activity had in fact occurred in the U.S. economy in March 2001 (NBER, 2001).” As the eight-months lag of the NBER report indicates, business cycle turning points are typically only recognized many months after the event; thus, the ability of the CFNAI to identify the recession in approximately real time is important—since early recognition of business cycle turning points will enable more timely monetary policy responses.