The 2020 Mid-Year Economic Update_long

Chicago Fed National Activity Index Rises in May

Three of four indicators made positive contributions to index.

Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) increased to 0.21 in May from -0.15 in April. Three of the four broad categories of indicators that make up the index made positive contributions to the index in May, and three of the four categories increased from April.

The index’s three-month moving average, CFNAI-MA3, decreased to 0.18 in May from 0.31 in April, marking its third consecutive reading above zero. May’s CFNAI-MA3 suggests that growth in national economic activity was somewhat above its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests limited inflationary pressure from economic activity over the coming year.

The CFNAI Diffusion Index, which is also a three-month moving average, increased to 0.23 in May from 0.20 in April. Fifty-two of the 85 individual indicators made positive contributions to the CFNAI in May, while 33 made negative contributions. Fifty-five indicators improved from April to May, while 29 indicators deteriorated and one was unchanged. Of the indicators that improved, 17 made negative contributions.

Production-related indicators contributed 0.20 to the CFNAI in May, up from -0.23 in April. Manufacturing production increased 0.6 percent in May after decreasing 0.1 percent in April, and manufacturing capacity utilization rose to 77 percent in May from 76.7 percent in the previous month.

Employment-related indicators contributed 0.10 to the CFNAI in May, down from 0.26 in April. The unemployment rate remained at 6.3 percent in May after declining by 0.4 percentage points in April; and nonfarm payrolls increased by 217,000 in May after rising by 282,000 in the previous month. The sales, orders and inventories category contributed 0.04 to the CFNAI in May, up from -0.03 in April.

The contribution from the consumption and housing category to the CFNAI moved up to -0.12 in May from -0.15 in April. Consumption indicators, on balance, improved, pushing the category’s contribution higher. However, housing starts decreased to 1,001,000 annualized units in May from 1,071,000 in April, and housing permits decreased to 991,000 annualized units in May from 1,059,000 in the previous month.

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