Two approaches discussed in recent nowcasting provide insight into economic conditions.
figure 1: Lewis-Mertens-Stock (New York Fed) Weekly Economic Index (blue), Woloszko (OECD) Weekly Tracker (tan), US Baumeister-Leva-Lyon-Sims Weekly Economic Condition index plus 2% trend (green). The lilac shading indicates a hypothetical 2022H1 recession.Source: NY Fed via Fred, OECD, Wisioand the authors’ calculations.
Compared to five weeks ago, WEI has fallen to 2.2% from 2.8% in the week ended Sept. 24. While the weekly tracking index fell, the WECI was trending sideways. Given the large variance in methodologies, it’s not surprising that the weekly tracker continues to show lower-than-WEI growth. WEI relies on correlations of ten series (eg, unemployment claims, fuel sales, retail sales) available at weekly frequencies. The weekly tracker (0.9%) is a “big data” approach that uses Google Trends and machine learning to track GDP.
The 2.2% WEI reading for the week ended Oct. 29 could be interpreted as a 2.2% y/y quarterly increase if the 2.2% reading continued throughout the quarter. The OECD Weekly Tracker reading of 0.9% translates into a 0.9% year-on-year growth rate through 2010/29.This Baumeister et al. A reading of 1.5% was interpreted as 1.5% above the long-term trend growth rate. The average growth rate of US GDP from 2000-19 was about 2%, so that would imply an annual growth rate of 3.5% as of 10/29.
Since these are year-over-year growth rates, we may be in a recession in the first half because an observer Asserted a week ago, but it (still) seems unlikely.
GDPNow for the third quarter ended November 1 was 2.6% q/q SAAR.
