The NFCI
The National Financial Conditions Index, published weekly by the Federal Reserve Bank of Chicago, summarizes 105 measures of US financial activity — money markets, debt and equity markets, and the banking system — into a single index where zero represents average conditions since 1971.
Reading it
Positive values mean tighter-than-average conditions: wider spreads, tighter credit, higher volatility. Negative values mean looser than average. Sustained positive readings have accompanied every credit-driven downturn in the sample — the index crossed zero around the December 2007 business-cycle peak, spiked violently after Lehman in autumn 2008, and briefly surged in March 2020.
Why it matters
Credit is the transmission channel between financial markets and the real economy — when financial conditions tighten, borrowing, hiring, and investment follow with a lag. The NFCI captures that channel earlier and more comprehensively than any single spread, which is why it sits near the top of this monitor's financial block.