U.S. Economy Improves for May

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Manufacturing helped edge national business activity back into above-average territory for May, according to a Chicago Federal Reserve National Activity Index released (link opens as PDF) today. 

Based on a weighted average of 85 different indicators, the Chicago Fed Index provides an overall picture of our nation's economy. An above-zero reading denotes economic activity exceeding historical levels, while a negative number implies a historically underperforming economy.

After clocking in at an upwardly revised -0.15 (originally -0.32) for April, this month's report puts business activity back into positive territory with a 0.21 reading. From a longer-term perspective, however, the index's three-month moving average took a revised 0.23-point dip to 0.18. 

Chicago Fed National Activity Index Chart

Manufacturing was the main reason May's month-to-month index made such a major leap. While production-related indicators overall contributed 0.20 points to the index, manufacturing production jumped 0.6% after falling 0.1% in April, and manufacturing capacity utilization clocked in 0.3 percentage points higher to hit 77.0%. Employment also made a solid addition, contributing 0.10 points to May's numbers.

While the Chicago Fed's three-month moving average serves as an important reminder that month-to-month indices aren't the same as long-term indicators, investors can celebrate where May's gains came from. Manufacturing serves as an important economic backbone, and employment improvements signal steadier business optimism that won't disappear overnight. This week's upcoming durable goods orders, GDP growth, and jobless claims reports should shed further light on the overall health of the U.S. economy.

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The article U.S. Economy Improves for May originally appeared on Fool.com.

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