Led by declines in production-related indicators, the Chicago Fed National Activity Index (CFNAI) decreased to –0.45 in May from +0.08 in April. Of the four broad categories of indicators that make up the index, three deteriorated from the previous month and two made negative contributions in May.

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The index’s three-month moving average, CFNAI-MA3, ticked down from –0.13 in April to –0.34 in May, its third consecutive reading below zero, and its lowest value, since June 2011. May’s CFNAI-MA3 suggests that growth in national economic activity was below its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year.

The CFNAI Diffusion Index also moved lower in May, declining to –0.20 from +0.06 in the previous month. This marks the first time the CFNAI Diffusion Index was negative since June 2011. Thirty-two of the 85 individual indicators made positive contributions to the CFNAI in May, while 53 made negative contributions. Forty-seven indicators improved from April to May, while 36 indicators deteriorated and two were unchanged. Of the indicators that improved, nine made negative contributions.

The contribution from production-related indicators to the CFNAI dropped to –0.20 in May from +0.42 in April. Total industrial production ticked down 0.1 percent in May after rising 1.0 percent in April, and manufacturing production decreased 0.4 percent in May after increasing 0.7 percent in the previous month.

The consumption and housing category also made a negative contribution to the CFNAI in May, edging lower to –0.25 from –0.24 in April. Housing starts decreased to 708,000 annualized units in May from 744,000 in April, while housing permits rose to 780,000 annualized units from 723,000 over the same period.

Employment-related indicators made a neutral contribution to the CFNAI in May, up from –0.13 in April. Total payroll employment increased 0.1 percent in May after a similar gain in April. In contrast, civilian employment increased 0.3 percent in May after decreasing 0.1 percent in the previous month.

The sales, orders, and inventories category also made a neutral contribution to the CFNAI in May, down slightly from +0.02 in April.