US economic growth picks up in May – Chicago Fed


by Maria Martinez

The Federal Reserve Bank of Chicago said on Monday that US economic activity picked up in May after a small decline in the previous month.

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

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

The Chicago Fed said three of the four broad categories of indicators used to build the index made positive contributions in May, and three of the four categories improved.

Of the 85 individual indicators, 55 contributed positively to the CFNAI in May, while 30 contributed negatively. Fifty-seven indicators improved from April to May, while 27 indicators declined and one remained unchanged.

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

The contribution of employment, unemployment and hours to the index increased from 0.06 in May to 0.06 in April, as non-farm payrolls increased by 559,000 in May after an increase of 278,000 in May.

The contribution of sales, orders and inventory category to 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 Chicago Fed said individual consumption indicators in this category deteriorated broadly, while housing indicators have generally improved since April.

The CFNAI spread index jumped from 0.16 in April to 0.39 in May. The reading indicates that national economic growth is on the rise, as it is well above the minus 0.35 level historically associated with periods of economic growth.

The index’s three-month moving average, 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. Consistent with the spread index, the CFNAI-MA3 indicates that the economy is in an expansion zone, as a value above minus 0.70 is associated with an increased potential for economic growth.

Write to Maria Martinez at maria.martinez@wsj.com



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