Gavekal Capital: US Probably Grew At "Trend Growth" In The First Quarter

Monday, April 21, 2014

US Probably Grew At "Trend Growth" In The First Quarter

There are so many economic indicators, especially for the United States, that it can be tough to stay on top of all them. Fortunately, there are a few "aggregate" indicators out there that provide a nice summary of many economic statistics. One of those aggregate indicators that came out today was the Chicago Fed National Activity Index (CFNAI).

The CFNAI is a "weighted average of 85 monthly indicators of national economic activity. It is constructed to have an average value of zero and a standard deviation of one" (link to website). This means when the series is positive, economic activity is above trend growth and vice versa when the series is negative. Many people look at the 3-month moving average as a gauge for what GDP might look like. The latest 3-month moving average is 0 which means that the US economy most likely grew at exactly trend growth according to this measure. If we equate trend growth with average growth or median growth over the past four years, then the economy most like grew by about 2%-2.25% year-over-year in the first quarter of 2014 (average year-over-year growth over the past four years has been 2.25% and median year-over-year growth has been 2.02%).