Tuesday, March 31, 2020

Weekly Economic Index (WEI)

March 31, 2020

 

Daniel Lewis, New York Fed
Karel Mertens, Dallas Fed
James Stock, Harvard University

The WEI is an index of 10 weekly indicators of real economic activity, scaled to have the units of four-quarter percent change of real GDP.




  • The WEI is currently -3.04 percent, scaled to Q1 4-quarter GDP growth, for the week ending March 28; for reference, the WEI stood at 1.58 for the week ending February 29.
  • Today’s update of the WEI reflects both new incoming data and methodological changes in the index. The index now includes data on continuing claims of unemployment insurance, railroad traffic, and federal taxes withheld.
  • Today’s decline is driven by sharp declines in staffing, steel production, and consumer confidence, with retail sales also starting to dissipate. While we incorporate forecasts of initial and continuing UI claims, we anticipate a further downward revision when the data is released on Thursday.
  • As alternative scales, the current WEI implies a 13.9 percent decrease in IP for March (YoY).

Thursday, March 26, 2020

Weekly Economic Index (WEI)

March 26, 2020

 

Daniel Lewis, New York Fed
Karel Mertens, Dallas Fed
James Stock, Harvard University

The WEI is an index of 7 weekly indicators of real economic activity, scaled to have the units of four-quarter percent change of real GDP.



  • The WEI is currently -4.41, scaled to Q1 4-quarter GDP growth, for the week ending March 21; for reference, the WEI stood at 1.60 for the week ending February 29.
  • Today's news of 3,283,000 new claims for unemployment insurance (seasonally adjusted) last week was worse than already-pessimistic expectations and drove down the WEI for the week ending March 21. The new claims data, along with previously reported declines in consumer sentiment, fuel sales, steel production, and electricity consumption for last week, outweigh continued strong retail sales last week as consumers stockpiled. Today's update represents the first major decline in the WEI as a result of the response to the novel coronavirus, with the weekly value implying 4-quarter GDP growth of -4.4%. This decline is comparable to the decline at the depth of the financial crisis recession.
  • The current WEI implies a 17.8 percent decrease in the Index of Industrial Production (YoY).
  • Data dashboard and .pdf of release

Tuesday, March 24, 2020

Weekly Economic Index (WEI)

March 24, 2020

 

Daniel Lewis, New York Fed
Karel Mertens, Dallas Fed
James Stock, Harvard University

The WEI is an index of 7 weekly indicators of real economic activity, scaled to have the units of four-quarter percent change of real GDP.



  • Based on the partial data currently available for the week ending March 21, the WEI is 0.99 percent, essentially unchanged from its value of 1.01 for the week ending March 14. For reference, the WEI stood at 1.60 percent for the week ending February 29.
  • Despite the volatility in financial markets and the first major economic shutdowns in response to the coronavirus, overall economic activity was flat last week as measured by the currently available data. The Rasmussen Consumer Index declined sharply, however same-store sales rose, reflecting stockpiling, and steel production was roughly flat.
  • Data released over the next two days, especially new claims for unemployment insurance, will provide a fuller picture of last week, and the WEI for last week could be revised down sharply based on those data.
  • Data dashboard and .pdf of release
 Coronavirus Data Gaps and the Policy Response to the Novel Coronavirus
  
This note (updated 3/25/20) lays out the basic SIR epidemiological model of contagion, with a target audience of economists who want a framework for understanding the effects of social distancing and containment policies on the evolution of contagion and interactions with the economy. The model is calibrated to the most recent data, however it simple nature abstracts from many important considerations and its output is not intended to supersede estimates from more sophisticated epidemiological models.

This note makes four main points:
  • The effect of social distancing and business shutdowns on epidemic dynamics enters the model through a single parameter, the case transmission rate β. For a specified case transmission rate, the policy design question is how to achieve that case transmission rate while minimizing economic cost. A second economic question is, what is the optimal case path for β, trading off the economic cost of that path against the costs in deaths.
  • The parameters of the model are not well estimated in the literature on the coronavirus because of the lack of available data. Data on prevalence, for example, is obtained from positive rates of testing for the coronavirus, however so far tests have been rationed and almost entirely have been administered to a selected population, those at risk and showing symptoms. Thus, the fraction of tests that are positive do not estimate the population rate of infection.
  • Using Bayes Law, it is possible to re-express the model in terms of β and the asymptomatic rate, which is the fraction of the infected who show sufficiently mild, or no, symptoms so that they are not tested under current testing guidelines. The virtue of re-expressing the model this way is that it makes use of the positive testing rate, on which there is good data. The COVID-19 asymptomatic rate is unidentified in our model and recent estimates in the epidemiological literature range from 0.18 to 0.86. However, the asymptomatic rate could be estimated accurately and quickly by testing a random sample of the overall population.
  • The policy response and its economic consequences hinge critically on the asymptomatic rate. As we illustrate using two policy paths for β, without better knowledge of this knowable parameter, policymakers could make needlessly conservative decisions which would have vast economic costs.
Read more...

Wednesday, March 18, 2020


Weekly Economic Index

Tracking the Economic Effect of the Coronavirus

Daniel Lewis, Federal Reserve Bank of New York*
James Stock, Harvard University

This note describes a weekly economic index (WEI) developed to track the rapid economic developments associated with the response to the novel Coronavirus in the United States.

Summary
The WEI is a composite of 6 weekly economic indicators: Redbook same-store sales, Rasmussen Consumer Confidence, new claims for unemployment insurance, the American Staffing Association Staffing Index, steel production, and wholesale sales of gasoline, diesel, and jet fuel. All series are represented as year-over-year percentage changes. These series are combined into a single index of weekly economic activity. The index closely tracks monthly industrial production and quarterly GDP. Of these six series, five are available by Thursday morning for the week ending the previous Saturday. The most recent values of the index are plotted below.



For the week ended March 14, there were two countervailing effects. Consumer confidence plummeted and new claims for unemployment insurance jumped sharply, but same-store sales surged as a result of the run on groceries and supplies. The other measures of real economic activity, as measured by steel production and sales of gasoline, diesel, and jet fuel, were off only slightly, as firms made only initial adjustments, or no adjustments at all, to the restrictions on movement, and only a few locations had issued emergency declarations or orders to close bars, restaurants, and otherwise restrict large gatherings.Taken together, the weekly index fell, measuring the first widespread economic impacts of the Coronavirus and the response measures.

Links
  • Deck for Brookings Papers on Economic Activity virtual panel on the Coronavirus and the Economy, 3/19/20
  • Deck comparing the index to monthly and quarterly variables
  • Deck with detailed discussion of data sources
  • Deck with methods, sensitivity analysis, and regression validation


*The views expressed are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System.