{"slug":"financial-conditions-index","name":"Financial Conditions Index","family":"Macro-financial conditions","status":"active","estimate":"A quarterly, standardized first-principal-component summary of eight U.S. financial and credit indicators, oriented so higher means tighter conditions.","page":"/conditions","implementation":{"enginePaths":["engine/finweave_engine/layers/macro/fci.py"],"producerPath":"scripts/build_conditions.py","outputs":["data/parquet/conditions_series.parquet"]},"methodology":[{"path":"engine/finweave_engine/layers/macro/fci.py","lines":[33,135],"note":"compute_fci() implements component standardization, PCA weighting, re-standardization, and the engine sign convention; classify_fci_regime() applies the regime thresholds."},{"path":"docs/conditions_methodology.md","lines":[67,92],"note":"Documents the exact z-score, PCA-loading, re-standardization, build orientation, and classification rules used here."},{"path":"docs/conditions_methodology.md","lines":[605,635],"note":"Summarizes the parameters and discloses the quarterly eight-component composite's modest NFCI benchmark correlation."}],"data":{"vintage":"141 quarterly observations from 1991-03-31 through 2026-03-31, measured 2026-08-30","tables":["data/parquet/conditions_series.parquet"],"sources":[{"label":"Federal Reserve Economic Data (FRED)","url":"https://fred.stlouisfed.org/"}]},"method":["Each surviving component is standardized over the full sample after the documented term-spread and real-credit-growth sign inversions. The engine eigendecomposes the component correlation matrix and uses the first principal component's loadings, then re-standardizes the weighted composite to mean zero and standard deviation one.","Because the engine's designated high-yield-spread anchor is absent from the long-history component set, the producer resolves the arbitrary PCA sign against the BAA10Y credit-spread component. Tighter credit conditions therefore map to a higher index.","The published index is a small, transparent eight-indicator quarterly composite. It is not a replica of the weekly 105-measure Chicago Fed NFCI."],"equations":[{"label":"Component z-score","expr":"z = (x - mean) / std"},{"label":"PCA-weighted composite","expr":"FCI_raw = Z @ pc1_loadings"},{"label":"Re-standardized FCI","expr":"FCI = (FCI_raw - mean) / std"},{"label":"Regime classification","expr":"EXPANSION if FCI < -0.5; NEUTRAL if -0.5 <= FCI <= 0.5; TIGHTENING if 0.5 < FCI <= 1.5; STRESS if FCI > 1.5"}],"validation":["The output contains 141 FCI observations from 1991-03-31 through 2026-03-31.","The methodology records the correctly oriented 2008Q4 stress peak and an NFCI correlation of 0.28 over the 141-quarter comparison, a modest relationship that is disclosed rather than treated as replication."],"limitations":["Two quarterly inputs force quarterly frequency, which can average away sharp intra-quarter market stress.","The credit-spread channel rests on BAA10Y because the ICE OAS series are truncated in FRED and TEDRATE is discontinued.","Full-sample standardization and PCA make this a descriptive historical composite, not a point-in-time estimated forecasting model or a monetary-policy stance measure."],"references":[{"citation":"Brave and Butters (2011), Monitoring financial stability: A financial conditions index approach, Federal Reserve Bank of Chicago Economic Perspectives 35(1): 22-43."}],"endpoints":[{"path":"/api/methods/[slug]","example":"/api/methods/financial-conditions-index","method":"GET","returns":"Registry metadata, implementation paths, measured vintage, methodology evidence, validation, and limitations. No model observations or parquet contents."}],"lastVerified":"2026-08-30"}