US recession risk rose in May - Chicago Fed index
However, the regional Fed bank said that the recent bout of weakness differs from the five downturns since 1967, due partly to the fact that consumer spending is holding in.
The Chicago Fed said that its monthly National Activity Index recovered slightly to -1.06 in May from a revised -1.23 in April. The April reading had been -1.09.
But the three-month moving average came in at -1.04 from -0.96 in April, which the Chicago Fed said suggests a greater risk of recession -- loosely defined as at least two consecutive quarters of economic contraction.
The Fed bank said that in each of the five prior recessions in the period since 1967 over which the index has been constructed, the three-month average had fallen below -1.00, but in each of those instances it breached the -1.50 level. The regional Fed bank noted the current three-month moving average is still above those recessionary levels.
It also said that the recent period of substantial economic weakness "appears to be different" from those prior periods of contraction.
"In those periods, housing activity and consumer spending on durable goods tended to fall sharply. During the current slowdown, the personal consumption and housing component of the index has remained slightly positive, and this has minimized the decline in the (index)," the Chicago Fed said.
"Nevertheless, the May (three-month moving average) indicates a greater risk of recession than in any previous month this year," it added.
May marked the 11th consecutive month that the moving average was below zero, a sign of below-trend national economic growth and a sign of reduced pressure on future inflation.
The Chicago Fed index is a reading based on 85 economic indicators that cover areas including production, income, employment, consumption, housing and manufacturing.
Overall, 61 of the 85 indicators showed below-average growth in May, the Fed bank said. The remaining 24 components were estimates.
A year ago, the monthly index reading was at -0.10 while the three-month moving average was a solid +0.19.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@centralbanking.com or view our subscription options here: http://subscriptions.centralbanking.com/subscribe
You are currently unable to print this content. Please contact info@centralbanking.com to find out more.
You are currently unable to copy this content. Please contact info@centralbanking.com to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@centralbanking.com
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@centralbanking.com