September 2025 Chicago Fed National Activity Index: Signs of Moderation Amid Persistent Headwinds
The Chicago Fed National Activity Index (CFNAI) for September 2025 registered at -0.12, improving from August’s -0.19 but still signaling below-trend economic growth. This latest print, released on September 22, 2025, reflects a modest easing in economic contraction pressures compared to the prior month, yet remains negative for the second consecutive month. Drawing from the Sigmanomics database and historical context, this report analyzes the CFNAI’s geographic and temporal scope, core macroeconomic indicators, monetary and fiscal policy influences, external shocks, financial market reactions, and structural trends shaping the US economy’s near-term trajectory.
Table of Contents
The CFNAI is a weighted average of 85 monthly indicators covering production, employment, personal consumption, housing, and sales. It provides a comprehensive snapshot of US economic activity relative to historical norms. The September 2025 reading of -0.12, while better than August’s -0.19, remains below zero, indicating growth slightly below trend. This contrasts with the positive 0.18 reading in March 2025, marking a shift from mild expansion to modest contraction over the past six months.
Geographic & Temporal Scope
The CFNAI aggregates data from all US regions, capturing broad economic trends across manufacturing hubs, service sectors, and consumer markets. Its monthly frequency allows timely assessment of economic momentum. The September print reflects activity through late August and early September, a period marked by mixed regional performance with stronger growth in the South and West offset by softness in the Midwest and Northeast.
Core Macroeconomic Indicators
Key drivers include industrial production, employment gains, and retail sales. The manufacturing sector showed slight improvement, with capacity utilization edging up to 78.50%, while nonfarm payrolls increased by 180,000 in August. However, consumer spending growth slowed to 0.20% MoM, weighed down by elevated inflation and tighter credit conditions. Inflation remains sticky at 3.70% YoY, above the Federal Reserve’s 2% target, constraining real income growth.
Foundational Indicators
Monetary Policy & Financial Conditions
The Federal Reserve’s ongoing restrictive stance, with the federal funds rate steady at 5.25%-5.50%, continues to tighten financial conditions. The Chicago Fed’s Financial Conditions Index remains elevated, reflecting higher borrowing costs and reduced liquidity. The yield curve remains inverted between 2- and 10-year Treasuries, signaling market expectations of slower growth or recession risks ahead.
Fiscal Policy & Government Budget
Federal fiscal policy remains moderately expansionary, with the 2025 budget deficit projected at 5.10% of GDP, slightly below last year’s 5.40%. Infrastructure spending and targeted social programs provide some stimulus, but rising interest costs on government debt limit fiscal space. State and local governments maintain cautious spending amid revenue uncertainties.
External Shocks & Geopolitical Risks
Global supply chain disruptions have eased but remain a factor, especially in semiconductors and energy markets. Geopolitical tensions in Eastern Europe and the South China Sea add uncertainty to trade and investment flows. Commodity price volatility, particularly in oil and natural gas, has moderated but still influences inflation and production costs.
Chart Dynamics
Drivers this month
- Industrial production contributed 0.05 points, reflecting factory output gains.
- Employment added 0.03 points, supported by steady job creation.
- Consumer spending subtracted -0.07 points due to inflation pressures.
- Housing market activity remained flat, contributing near zero.
- Trade balance effects were mildly negative, subtracting -0.03 points.
Policy pulse
The index remains below zero, consistent with the Federal Reserve’s restrictive monetary policy aimed at cooling inflation. The reading suggests the economy is growing below trend but not contracting sharply, aligning with the Fed’s goal of a “soft landing.”
Market lens
Immediate reaction: The US dollar index (DXY) strengthened 0.15% post-release, while 2-year Treasury yields rose 4 basis points, reflecting expectations of sustained Fed tightening. Equity markets showed mild gains, with the S&P 500 up 0.30%, signaling investor relief at the less negative-than-expected data.
The CFNAI’s partial rebound signals a moderating slowdown rather than a deep recession. The index’s stabilization suggests economic resilience amid tightening financial conditions, but persistent inflation and geopolitical risks temper optimism.
Forward Outlook
Scenario Analysis
- Bullish (20% probability): Inflation eases faster than expected, boosting consumer spending and investment. CFNAI turns positive by Q4 2025, supporting above-trend growth.
- Base (55% probability): Growth remains modestly below trend with CFNAI fluctuating near zero. Monetary policy stays restrictive but avoids overt tightening, allowing gradual economic normalization.
- Bearish (25% probability): Inflation proves persistent, forcing further Fed hikes. Financial conditions tighten sharply, pushing CFNAI below -0.30 and triggering recession fears.
Structural & Long-Run Trends
Long-term US growth is challenged by demographic shifts, productivity plateaus, and global competition. The CFNAI’s recent volatility underscores structural adjustments in labor markets and technology adoption. Investment in green energy and digital infrastructure may support future expansion, but near-term headwinds remain significant.
Closing Thoughts
The September 2025 CFNAI reading of -0.12 signals a US economy that is stabilizing but still growing below trend. Monetary tightening, inflation pressures, and geopolitical uncertainties continue to weigh on activity. While the index’s improvement from August offers some relief, risks remain skewed to the downside. Policymakers and market participants should monitor inflation dynamics, financial conditions, and external shocks closely in the coming months.
Data sourced from the Sigmanomics database and Chicago Fed releases underpin this analysis. The CFNAI remains a vital barometer for gauging the US economic pulse and guiding macroeconomic expectations.
Selected tradable symbols relevant to CFNAI trends include: SPY (S&P 500 ETF, equity market proxy), USDEUR (USD/EUR forex pair, currency strength indicator), BTCUSD (Bitcoin/USD, risk sentiment barometer), TSLA (Tesla, cyclical growth stock), USDCAD (USD/CAD, commodity-linked currency).
Key Markets Likely to React to Chicago Fed National Activity Index
The CFNAI’s monthly updates influence a range of markets sensitive to US economic momentum. Equity markets such as SPY often track CFNAI trends, reflecting investor sentiment on growth prospects. Currency pairs like USDEUR and USDCAD respond to shifts in monetary policy expectations driven by CFNAI signals. The cryptocurrency market, represented by BTCUSD, often reacts to risk-on/risk-off dynamics influenced by economic data. Finally, growth-sensitive stocks like TSLA provide a barometer for cyclical economic confidence.
Extras: CFNAI vs. SPY Performance Since 2020
Since 2020, the CFNAI and the S&P 500 ETF (SPY) have shown a strong positive correlation. Periods of CFNAI expansion, such as early 2021 and early 2023, coincided with robust SPY rallies. Conversely, CFNAI contractions in late 2022 and mid-2025 aligned with equity market pullbacks. This relationship underscores the CFNAI’s value as a leading indicator for equity market trends and risk appetite.
FAQs
- What is the Chicago Fed National Activity Index?
- The Chicago Fed National Activity Index (CFNAI) is a monthly economic indicator summarizing 85 data points to gauge US economic growth relative to trend.
- How does the CFNAI affect financial markets?
- CFNAI readings influence market expectations for growth and monetary policy, impacting equities, bonds, currencies, and risk assets.
- What does a negative CFNAI reading indicate?
- A negative CFNAI suggests below-trend economic growth, signaling potential slowdown or contraction risks in the US economy.
The September CFNAI reading of -0.12 improved from August’s -0.19 and is above the 12-month average of -0.13. This marks a partial reversal of the recent downward trend seen since May 2025, when the index stood at -0.25. The index remains negative but shows signs of stabilization after a six-month stretch of subpar readings.
Comparing to historical data, the current level is better than the -0.28 recorded in June 2025 and the -0.40 low in November 2024, but still below the positive territory seen in early 2025. The index’s volatility reflects ongoing economic adjustments amid monetary tightening and external uncertainties.