Monitoring Real Activity in Real Time: The Weekly Economic Index

74 Liberty Street Economics

by Blog Author Daniel Lewis, Karel Mertens, and Jim Stock 3/30/20: After this post was published, we received requests for the underlying WEI data. We are providing that here in a downloadable file. Note that the values differ slightly from those plotted due to a minor methodological adjustment since these charts were created on Friday. Economists are well-practiced at assessing real activity based on familiar aggregate time series, like the unemployment rate, industrial production, or GDP growth. However, these series represent monthly or quarterly averages of economic conditions, and are only available at a considerable lag, after the month or quarter ends. When the economy hits sudden headwinds, like the COVID-19 pandemic, conditions can evolve rapidly. How can we monitor the high-frequency evolution of the economy in “real time”?
To address this challenge, we compute a Weekly Economic Index (WEI) to measure real economic activity at a weekly frequency. Few of the government agency data releases macroeconomists often work with are available at weekly or higher frequency. While financial data, like stock market prices and interest rates, are available at high frequency, we are particularly interested in real activity, not financial conditions. For our purpose, most weekly series come from private sources like industry groups, which collect data for the use of their members, or from commercial polling companies.

The table below details the series we use in our baseline index. These include a measure of same-store retail sales, an index of consumer sentiment, initial unemployment insurance (UI) claims, an index of temporary and contract employment, a measure of steel production, a measure of fuel sales, and a measure of electricity consumption. We transform all series to represent 52-week percentage changes, which also eliminates most seasonality in the data. As the current situation evolves, we may incorporate additional series to refine the index in the coming weeks.
Monitoring Real Activity in Real Time: More at The Weekly Economic Index