The Chicago Fed’s National Financial Conditions Index (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. Because U.S. economic and financial conditions tend to be highly correlated, we also present an alternative index, the adjusted NFCI (ANFCI). This index isolates a component of financial conditions uncorrelated with economic conditions to provide an update on financial conditions relative to current economic conditions.

The NFCI and ANFCI are updated on a weekly basis at 8:30 a.m. ET on Wednesday, and cover the time period through the previous Friday. When a federal holiday falls on a Wednesday or earlier in the week, the NFCI and ANFCI will be updated on Thursday.

Index Points to Looser Financial Conditions in Week Ending October 4

The NFCI decreased to –0.56 in the week ending October 4. Risk indicators contributed –0.25, credit indicators contributed –0.19, and leverage indicators contributed –0.12 to the index in the latest week.

The ANFCI also decreased in the latest week, to –0.55. Risk indicators contributed –0.32, credit indicators contributed –0.20, leverage indicators contributed –0.11, and the adjustments for prevailing macroeconomic conditions contributed 0.08 to the index in the latest week.

The NFCI and ANFCI are each constructed to have an average value of zero and a standard deviation of one over a sample period extending back to 1971. Positive values of the NFCI have been historically associated with tighter-than-average financial conditions, while negative values have been historically associated with looser-than-average financial conditions. Similarly, positive values of the ANFCI have been historically associated with financial conditions that are tighter than what would be typically suggested by prevailing macroeconomic conditions, while negative values have been historically associated with the opposite.

Notes: This figure plots the NFCI, along with contributions to the index from the three categories of financial indicators (risk, credit, and leverage). The contributions sum to the overall index.

Notes: This figure plots the ANFCI, along with contributions to the index from the three categories of financial indicators (risk, credit, and leverage) and from the macroeconomic adjustments. The contributions sum to the overall index.

Contributions to the NFCI and ANFCI

The first two columns in the table below denote how many series of the 105 used to construct the NFCI and ANFCI indicated tighter-than-average or looser-than average conditions in the most recent week. The latter two columns indicate how many of the 105 indicators have tightened or loosened in the past week.

The figures below present the contribution of each indicator to the NFCI and ANFCI, which are the weighted averages of 105 measures of financial activity. The sum of the contributions will result in the current value of the index. The contributions can be used to assess which indicators have the largest impact on the current value of the index. This is done by identifying the largest positive and largest negative contributions, as highlighted below.

The contributions capture both what a given indicator reveals about current financial conditions and how related that indicator is to other measures of financial activity. While some measures on their own may indicate substantially tighter or substantially looser financial conditions, their contributions to the index may be modest if these measures receive small weights in the index. Similarly, measures that indicate only modestly tighter or modestly looser financial conditions may have larger contributions to the index if these measures receive large weights. For the construction of the indexes, the weights are calculated to capture the relative importance of each indicator in explaining the historical fluctuations in all 105 measures of financial activity.

Revisions to the NFCI and ANFCI

Mean Absolute Values of Week-to-Week Revisions

The history of the NFCI and the ANFCI can change from week to week depending on incoming data, data revisions, and changes in the estimated weight given each financial indicator, although these changes tend to be very small. Because they include a number of monthly and quarterly financial indicators that are regularly revised, revisions to the NFCI and ANFCI will tend to be more pronounced near the beginning of each month. The ANFCI is additionally influenced by economic activity and inflation. For details see Chicago Fed Letter No. 386.