May 2018 Chicago Fed National Activity Index
Submitted by Atlas Indicators Investment Advisors on July 2nd, 2018
Economic output slowed in May 2018 according to the Chicago Fed National Activity Index (CFNAI). After reaching an upwardly revised +0.42 in April (originally +0.34), it declined to -0.15 in the middle of the second quarter. Unfortunately, this lower monthly tally hurt the three-month moving average which dropped to +0.18 from +0.48 to start the quarter.
Two of the four major categories improved while the remaining pair were lower. Employment-related indicators led the groups, adding +0.13. Also contributing positively to the total was the sales, orders, and inventories category which tacked on +0.05 in the period. Now the bad news. The other half of the report was less enthusiastic. Production-related indicators came in at -0.29 after being up +0.33 in April. The contribution of the personal consumption and housing category to the CFNAI edged down to -0.04 from -0.03 a month earlier. Also included in this release is a diffusion index for the CFNAI which considers how components have changed over the past three months. It slipped to +0.10 from +0.23 and suggested some slowing occurred.
This iteration was a mixed bag. Fewer than half of the indicator’s components added to the total with just 39 of the 85 individual indicators making positive contributions. Forty-three improved in the period, while 42 deteriorated. Of those improving, 17 continued to make negative contributions.
Economic output continues moving ahead despite the CFNAI’s setback in May. There are no glaring signs of economic stress. When the three-month average (currently +0.18) gets closer to -0.7, concerns regarding a recession will be elevated. As you can see, this indicator is far from levels associated with contraction.
