National Financial Conditions Index (NFCI)
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.
Latest NFCI Release
Financial Conditions Little Changed in Week Ending May 1
The NFCI ticked up to –0.79 in the week ending May 1, but continued to indicate looser-than-average financial conditions. The credit and risk subindexes increased slightly from the previous week, while the leverage and nonfinancial leverage subindexes were unchanged.
The ANFCI also increased slightly from the previous week, to 0.79. The current level of the ANFCI indicates that financial conditions in the latest week were somewhat tighter than what would typically be suggested by current economic conditions—as captured by the three-month moving average of the Chicago Fed National Activity Index (CFNAI-MA3) and three-month total inflation according to the Price Index for Personal Consumption Expenditures (PCE). Tables and Data
The release of the March Chicago Fed National Activity Index and PCE Price Index led to an average upward revision of roughly 0.3 standard deviations to recent values of the ANFCI. Revisions to the ANFCI can be largely attributed to differences between incoming data on economic growth and inflation and their expected values based on the historical dynamics of the index. The recent low readings of PCE inflation, in particular, have resulted in several large upward revisions to the ANFCI reported in early 2015.
More about the NFCI
The NFCI represents a common element taken from price, quantity and survey evidence on broad financial conditions with a unique set of desirable features:
- Weekly index frequency
- Historical coverage of nearly 40 years
- Broad coverage of financial markets (traditional and more recently developed)
- Quarterly, monthly and weekly variables with varied start and end dates
- Weights that reflect variables’ systemic and dynamic importance to the financial system
Like the Chicago Fed’s National Activity Index (CFNAI), the NFCI is a weighted average of a large number of variables (105 measures of financial activity) each expressed relative to their sample averages and scaled by their sample standard deviations. The ANFCI removes the variation in the individual indicators attributable to economic activity and inflation — as measured by the three-month moving average of the Chicago Fed’s NAI and three-month percent change in the Personal Consumption Expenditures (PCE) Price Index — before computing the index.