About the Chicago Index

For a while now, people have been predicting the end of manufacturing in America. The economic collapse coupled with stiff competition overseas has resulted in the loss of at least 300,000 manufacturing jobs, so it’s easy to see why many felt the industry was in decline. Recent Chicago Index reports, however, indicate manufacturing in the US is on the rise, providing hope that the industry will once again contribute to the country’s prosperity.

The Chicago Index, known officially as the Chicago Fed Midwest Manufacturing Index (CFMMI), is a monthly report that tracks activity in fifteen manufacturing industries across five states: Illinois, Indiana, Michigan, Iowa, and Wisconsin. The index was first produced in 1987 by the Federal Reserve Bank of Chicago, which wanted to track how regional economic and monetary policies affected manufacturing trends in those areas and how those trends differed from national ones. The Federal Reserve Board produces a similar report that covers the entire nation, against which the Chicago Index is compared.

According to the most recent reports—which were delayed due to the partial government shutdown—the Chicago Index score jumped to 65.9 by the end of October. The score is significantly higher than expected, exceeding Bloomberg’s estimates by at least ten points. The score is also the highest recorded since March 2011 and represents the biggest jump between monthly scores since July 1983.

Despite the damage the two-week government shutdown had on the economy as a whole, it appears the manufacturing industry strengthened during that time. According to Moody Analytics' senior economist Ryan Sweet, the auto industry is fueling much of the manufacturing rebound in the Midwest.

Manufacturing accounts for approximately 12 percent of the US economy. In addition to an increased demand for cars, an uptick in orders for construction equipment and appliances also appears to be contributing to the industry’s expansion. The aircraft sector seems to be ramping up production as well, possibly fueling even more industry growth. If markets improve overseas and businesses invest in manufacturing, the upswing is expected to continue and support economic growth in the coming year.

The Chicago Index is often used by economists as an early indicator of manufacturing trends throughout the country. For example, the Federal Reserve Bank of New York also indicated expansion occurred in the manufacturing industry in New York, New Jersey, and the southern part of Connecticut. The Federal Reserve Bank of Philadelphia reported experiencing record gains similar to the Chicago Index in the areas it tracks.

Improvement in the manufacturing industry has a positive ripple effect on other sectors, especially those that serve or depend on manufacturing companies such as facilities maintenance, engineering design companies, and construction. If the Chicago Index continues to climb, it’s possible the US will experience the economic rebound it’s been working hard the last six years to achieve.

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