The Chicago Fed National Activity Index for May improved to negative 0.96 from a revised negative 1.23 reading in April, originally reported as negative 1.17, the Federal Reserve Bank of Chicago reported yesterday.

Meanwhile, the three-month moving average increased to negative 1.08 in May, after April’s number was revised to negative 1.27 from negative 1.24. In May 2007, the index was negative 0.29, while the CFNAI-MA3 was negative 0.15 in that month.

The negative reading indicates national economic growth was below its historical trend and suggests little inflationary pressure from economic activity in the coming year. The May CFNAI-MA3 reading was the sixth month the index was below negative 0.70, indicating “an increasing likelihood that a recession has begun,” the Fed said.

Production-related indicators contributed negative 0.19 to the index compared to negative 0.64 in the previous month, while employment-related indicators contributed negative 0.45 after providing a negative 0.25 in April, the Fed said.

Consumption and housing-related data contributed negative 0.25 in May after contributing negative 0.28 in April, while sales, orders, and inventories contributed negative 0.08 after a negative 0.06 contribution the month before.

The index is a weighted average of 85 indicators of national economic activity and is constructed to have an average value of zero and a standard deviation of one. A zero value for the index indicates that the national economy is expanding at its historical trend rate of growth, negative values are associated with below-trend growth, and positive values indicate above-trend growth.

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