US economic growth resumed in May – Chicago Fed
By Maria Martinez
US economic activity increased in May, following a slight decline the previous month, the Chicago Federal Reserve said on Monday.
The Chicago Fed’s national activity index rose to 0.29 in May from minus 0.09 in April. The reading is below the consensus of economists, who surveyed by FactSet expected the indicator to be at 0.32.
The CFNAI index is composed of 85 economic indicators drawn from four main 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 the trend and a negative index reading corresponds to growth below the trend.
Three of the four broad indicator categories used to build the index made positive contributions to it in May, and three of the four categories improved from the previous 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 remained unchanged.
The rise in the overall index was driven by production-related indicators, which contributed 0.29 points, against minus 0.05 points in April. Industrial production rose 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 the non-agricultural workforce rose by 559,000 in May after increasing by 278,000 the previous 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. Personal consumption metrics in this category worsened overall, while housing metrics 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 indicates that national economic growth is increasing, as it is above the level of minus 0.35 that has historically been associated with periods of economic growth.
The index’s three-month moving average, the CFNAI-MA3, fell from 0.17 in April to 0.81 in May. Month-to-month movements can be volatile, so the indicator provides a more consistent picture of national economic growth. Consistent with the Diffusion Index, the CFNAI-MA3 signals that the economy is in expansion territory, as a value greater than minus 0.70 has been associated with an increasing likelihood of economic growth.
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