Chicago Fed National Activity Index Shows Improvement

A big reversal for the production component made for big improvement in the national activity index which beat Econoday's consensus range at minus 0.05 in May vs a revised and deeply negative minus 0.48 in April. Boosted by output at utilities and also of motor vehicles, production added 0.40 points to May's index after subtracting exactly that, 0.40 points, in April.

But for May it was the employment component, at minus 0.06 vs April's plus 0.05, that tilted the headline into negative ground reflecting the month's disappointingly low 75,000 increase in nonfarm payrolls. The index's other two components, personal consumption & housing and sales/orders/inventories, were both flat and little changed.

The gain for production in this report may already be distant history for monetary policy makers given Jerome Powell's warning last week that strength in manufacturing, due to slowing global trade and softening business sentiment, may now be in question.