The Tightening

The Chicago Fed's NFCI Non-Financial Leverage Subindex reads -0.4 as of June 2026, up from -0.86 in late 2023. In this index, zero represents average historical conditions and positive values indicate tighter-than-average leverage. The current reading is still negative — meaning conditions are technically looser than the historical average — but the speed and direction of the move matters more than the absolute level. The index has risen substantially since its recent low.

Leverage tightening means that borrowing is becoming harder and more expensive across the economy. This confirms what individual indicators already show: The Card Tax still elevated, The Warning Light sitting below its recession threshold for over a year, and The Mood Ring at levels not seen outside of recessions. The NFCI provides a single composite measure that integrates dozens of market-based signals into one directional reading.

In the pre-GFC period, this index rose from roughly -0.9 in 2003 to +2.7 in 2007, spending years above zero before the crisis hit. In the current cycle, it's rising from -0.86 but has not yet crossed zero. Debt Service as a share of disposable income is already at levels suggesting households are feeling the effects of tighter conditions before the index reaches its stress threshold.