The economic weekly is a source of high frequency short-term data for analysing the trends in the economy. It is a useful tool for entrepreneurs, policy makers and researchers.
This week’s economic news includes a decline in world share prices, warnings from US banks and China’s exports and imports dropping at the sharpest rate in 2.5 years.
Weekly Economic Indicators
Weekly economic indicators provide investors with a view into an economy’s current state. They also help to determine the health of the economy as a whole and how an economy is expected to change in the future.
A key piece of economic data is the Purchasing Manager’s Index, or PMI for short. It provides information on the confidence of businesses within the economy, allowing analysts to predict if the economic outlook is expansionary or contractionary.
Other important economic indicators include gross domestic product (GDP) and inflation. The former increases when the economy is expanding; the latter decreases when the economy is declining.
Central banks have recently started to use alternative, high-frequency indicators to monitor the economic environment. These include monitoring keywords in internet searches, payment card transactions and trends in consumer behaviour.
Weekly Economic Index
The weekly economic index (WEI) is a measure of real economic activity. It is based on data available at high frequency and represents the common component of ten different daily and weekly series covering consumer behavior, labor market, and production.
The WEI is a leading indicator of business activity, which means that it is able to predict the direction of economic activity six to nine months in advance. It is therefore useful for identifying recession periods or economic contractions.
Aside from its predictive power, the WEI is also an excellent way to monitor the state of the economy in real time. Each week, the index is updated using data that is available up to 8 a.m.
WEI is scaled to four-quarter GDP growth rate. Thus, if the index reads -2 percent for a quarter, one would expect average GDP that quarter to be 2 percent lower than in the prior year.
Weekly Economic Activity Index
Lags in the publication of comprehensive measures of economic activity, such as real gross domestic product (GDP), often make it difficult for central banks to provide timely predictions for monetary policy. To monitor economic developments, central banks have begun using alternative, high-frequency indicators available at a daily or weekly frequency.
The weekly economic activity index is a composite of ten series ranging from consumer spending to industrial production, all represented as year-over-year percentage changes. The index is scaled to the four-quarter GDP growth rate, meaning that a WEI of -2 percent implies that GDP would be 2 percent lower in the current quarter than a year ago.
The index includes electricity consumption data, weekly labour market data, and other relevant industrial, transport, and retail sales indicators. It is designed to capture the momentum in real economic activity that monthly and quarterly indicators cannot achieve, allowing us to monitor developments in real economic activity during periods of rapid economic change.
Monthly Economic Activity Index
The monthly economic activity index is a composite indicator that summarizes four state-level indicators to provide an overall picture of current economic conditions. These are: nonfarm payroll employment, average hours worked in manufacturing by production workers, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average).
These indexes are often used as a guide for central banks to conduct monetary policy.
A large body of research has developed methods that can use a broad range of high-frequency (monthly) economic indicators to track changes in economic activity in real time.
We construct a new index that tracks the monthly cyclical component of quarterly real GDP growth. The new index is shown to be statistically superior at identifying cycles in U.S. inflation in comparison with the CFNAI-MA3. We also evaluate it over its history versus the ADS index and CFNAI-MA3 in figures 6.
