Chicago Fed economic index falls sharply

he Chicago Fed’s national activity index registered at a negative 16.74 in April, down from a revised negative 4.97 in March. The index’s less-volatile three month moving average decreased to a negative 7.22 in April from negative 1.69 in the prior month. An increasing likelihood of a recession has historically been associated with a three-month moving average below negative 0.70, the regional Fed bank said.
  
What happened: The Chicago Fed index is a weighted average of 85 economic indicators. A zero value for the index indicates that the national economy is expanding at its historical trend rate of growth. Negative values indicate below-average growth. Seventy-nine of the 85 individual indicators made negative contributions in April. Six made positive contributions.

The contribution of production-related indicators declined to negative 5.63 to the index, down from negative 2.31 in March..

Employment-related indicators contributed negative 9.06 to the index in April, down from negative 1.06 in the prior month.

Big picture: The shutdown in the U.S. economy in March and April to limit the spread of the coronavirus pandemic led to a dramatic weakening in economic data. Economists expect gross domestic product to contract up to a 40% annualized rate in the second quarter. The biggest question is whether the economy can regain growth momentum after such a steep decline.