CFNAI Indicates Even Stronger Economic Activity in May

The Chicago Fed National Activity index moved sharply higher in May, to +0.91, from a downwardrevised +0.52 the previous month. As was the case in April, production- and employment-related data added the most to May’s CFNAI, although each of the four broad categories of indicators that comprise the index made positive contributions. The three-month moving average, CFNAI-MA3, was +0.75 in May, up from +0.66 in April. This was the ninth consecutive reading above zero and the highest since December 1994. CFNAI-MA3 values above zero are associated with above-trend economic growth; accordingly, the latest CFNAI-MA3 value suggests that economic activity was increasing faster than its historical trend rate of growth again in May. In addition, readings above +0.70 in the CFNAI-MA3 at least two years into an expansion point to an increasing likelihood of rising inflation.