The 2020 Mid-Year Economic Update_long

Chicago Fed National Activity Index Increases in May

The PMI fell below 50.

Led by improvements in production-related indicators, the Chicago Fed National Activity Index increased to -0.3 in May from -0.52 in April. Two of the four broad categories of indicators that make up the index increased from April, but only one of the four categories made a positive contribution to the index in May.

The index’s three-month moving average, CFNAI-MA3, decreased to -0.43 in May from -0.13 in April, marking its third consecutive reading below zero and its lowest level since October 2012. 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 decreased to -0.35 in May from -0.08 in April. Thirty-three of the 85 individual indicators made positive contributions to the CFNAI in May, while 52 made negative contributions. Forty-nine indicators improved from April to May, while 35 indicators deteriorated. Of the indicators that improved, 25 made negative contributions.

Production-related indicators contributed -0.10 to the CFNAI in May, up from -0.33 in April. The level of industrial production was unchanged in May after decreasing 0.4 percent in April. However, the Institute for Supply Management’s Manufacturing Purchasing Managers’ Index fell below 50 in May, decreasing to 49.0 from 50.7 in April.

Employment-related indicators contributed 0.01 to the CFNAI in May, up from -0.06 in April. The unemployment rate ticked up to 7.6 percent in May from 7.5 percent in April, but nonfarm payrolls rose by 175,000 in May after increasing by 149,000 in the previous month.

The contribution from the consumption and housing category to the CFNAI in May was unchanged from the previous month at -0.17. Housing permits decreased to 974,000 annualized units in May from 1,005,000 in April, while housing starts increased to 914,000 annualized units in May from 856,000 in the previous month.

The contribution from the sales, orders, and inventories category to the CFNAI in May was also negative, moving down to -0.04 from +0.03 in April.

The April monthly index was revised to -0.52 from an initial estimate of -0.53, and the March monthly index was revised to -0.48 from last month’s estimate of -0.23. 

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