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Chicago Fed National Activity Index Suggests Economic Growth Increased Substantially in May
Led by improvements in production- and employment-related indicators, the Chicago Fed National Activity Index (CFNAI) rose to +2.61 in May from –17.89 in April. All four broad categories of indicators used to construct the index made positive contributions in May, and all four categories increased from April. The index’s three-month moving average, CFNAI-MA3, moved up to –6.65 in May from –7.50 in April.
On June 8, 2020, the National Bureau of Economic Research determined that the U.S. economy had reached a business cycle peak in February 2020. The CFNAI-MA3 first pointed to an increasing likelihood that a recession had begun in March 2020, as initially reported in the April 20, 2020, CFNAI release.
The CFNAI Diffusion Index, which is also a three-month moving average, moved up to –0.43 in May from –0.58 in April. Fifty-seven of the 85 individual indicators made positive contributions to the CFNAI in May, while 28 made negative contributions. Seventy-two indicators improved from April to May, while 13 indicators deteriorated. Of the indicators that improved, 17 made negative contributions.
Production-related indicators contributed +0.89 to the CFNAI in May, up from –5.94 in April. Industrial production increased 1.4 percent in May after falling 12.5 percent in April. The contribution of the sales, orders, and inventories category to the CFNAI increased to +0.02 in May from –1.59 in April.
Employment-related indicators contributed +1.53 to the CFNAI in May, up from –9.06 in April. Nonfarm payrolls rose by 2,509,000 in May after falling by 20,687,000 in April, and the unemployment rate decreased to 13.3 percent in May from 14.7 percent in the previous month. The contribution of the personal consumption and housing category to the CFNAI increased to +0.17 in May from –1.30 in April. Housing starts increased to 974,000 annualized units in May from 934,000 in the previous month.
The CFNAI was constructed using data available as of June 18, 2020. At that time, May data for 51 of the 85 indicators had been published. For all missing data, estimates were used in constructing the index. The April monthly index value was revised to –17.89 from an initial estimate of –16.74, and the March monthly index value was revised to –4.67 from last month’s estimate of –4.97. Revisions to the monthly index can be attributed to two main factors: revisions in previously published data and differences between the estimates of previously unavailable data and subsequently published data. The revision to the April monthly index value was primarily due to the latter, while the revision to the March monthly index value was primarily due to the former.
Posted: June 22, 2020 Monday 08:30 AM