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U.S. Economic Growth Picked Up in May — Chicago Fed

By Maria Martinez

 

U.S. economic activity grew in May, following a small decline in the previous month, the Federal Reserve Bank of Chicago said Monday.

The Chicago Fed National Activity Index increased to 0.29 in May from minus 0.09 in April. The reading is below economists’ consensus, who polled by FactSet expected the indicator to come in at 0.32.

The CFNAI index is composed of 85 economic indicators drawn from four broad categories of data: production and income; employment, unemployment and hours; personal consumption and housing; and sales, orders and inventories. A positive index reading corresponds to growth above trend and a negative index reading corresponds to growth below trend.

Three of the four broad categories of indicators used to construct the index made positive contributions to it in May, and three of the four categories improved from the prior month, the Chicago Fed said.

Fifty-five of the 85 individual indicators made positive contributions to the CFNAI in May, while 30 made negative contributions. Fifty-seven indicators improved from April to May, while 27 indicators deteriorated and one was unchanged.

The rise in the headline index was driven by production-related indicators, which contributed 0.29 points, up from minus 0.05 points in April. Industrial production moved up 0.8% in May after increasing 0.1% in April.

The contribution of the employment, unemployment and hours category to the index rose to 0.16 points in May from 0.06 in April, as nonfarm payrolls increased by 559,000 in May after rising by 278,000 the prior month.

The contribution of the sales, orders and inventories category to the CFNAI increased to 0.02 in May from minus 0.06 in April.

The personal consumption and housing category contributed minus 0.18 to the index in May, down from minus 0.04 in April. The personal consumption indicators in this category broadly deteriorated, while the housing indicators generally improved from April, the Chicago Fed said.

The CFNAI diffusion index edged up to 0.39 in May from 0.16 in April. The reading signals that national economic growth is increasing, as it is above the minus 0.35 level that historically has been associated with periods of economic growth.

The index’s three-month moving average, the CFNAI-MA3, rose to 0.81 in May from 0.17 in April. Month-to-month movements can be volatile, so the indicator provides a more consistent picture of national economic growth. In line with the diffusion index, the CFNAI-MA3 signals the economy is in expansion territory, as a value above minus 0.70 has been associated with an increasing likelihood of economic growth.

 

Write to Maria Martinez at [email protected]

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