The three-month average of the Chicago Fed National Activity Index (CFNAI) is expected to tick higher in tomorrow’s May report, based on The Capital Spectator’s average point forecast for several econometric estimates. The average projection for -0.15 reflects a modest improvement over the previous month. The forecast for May still anticipates that US economic growth is running below the historical trend rate for expansion. But the projection also points to a 3-month CFNAI reading that’s well above the level that marks a new NBER-defined recession.

Only values below -0.70 signal an “increasing likelihood” that a recession has started, according to guidelines from the Chicago Fed. Using today’s average estimate for May as a guide, CFNAI’s three-month average is expected to reaffirm an expansion that’s moderately below the historical trend but well above the tipping point that equates with contraction.

Here’s a closer look at the numbers, followed by brief definitions of the methodologies behind The Capital Spectator’s projections that are used to calculate the average forecast:

AR-4A: A vector autoregression model that analyzes four economic time series to project the Chicago Fed National Activity Index: the Capital Spectator’s Economic Trend & Momentum Indexes, the Philadelphia Fed US Leading Indicator, and the Philadelphia Fed US Coincident Economic Activity Indicator. VAR analyzes the interdependent relationships of these series with CFNAI through history. The forecasts are run in R with the “vars” package.

VAR-4B: A vector autoregression model that analyzes four economic time series to project the Chicago Fed National Activity Index: US private payrolls, real personal income less current transfer receipts, real personal consumption expenditures, and industrial production. VAR analyzes the interdependent relationships of these series with CFNAI through history. The forecasts are run in R with the “vars” package.

ARIMA: An autoregressive integrated moving average model that analyzes the historical record of the Chicago Fed National Activity Index in R via the “forecast” package.

ES: An exponential smoothing model that analyzes the historical record of the Chicago Fed National Activity Index in R via the “forecast” package.