Follow up to “So you think we’re in a recession as of beginning August”…and rejoinder to those who believe we’ve already been in recession for a while.
The WEI reading for the week ending 8/6 of 3.2 is interpretable as a y/y quarter growth of 3.2% if the 3.2 reading were to persist for an entire quarter. The OECD Weekly Tracker reading of 1.9 is interpretable as a y/y growth rate of 1.9% for year ending 8/6. The Baumeister et al. reading of 2.1% for the week ending 6/25 is interpreted as a 2.1% growth rate in excess of long term trend growth rate. Average growth of US GDP over the 2000-19 period is about 2%.
Figure 2: Lewis-Mertens-Stock Weekly Economic Index (blue), OECD Weekly Tracker (tan), Baumeister-Leiva-Leon-Sims Weekly Economic Conditions Index for US plus 2% trend (green). Source: NY Fed via FRED, OECD, WECI, and author’s calculations.
The summary is that the WEI (10 components) indicates continued strong growth through 8/6. The OECD Weekly Tracker, based on Google Trends and machine learning, suggests a slowdown in May-July 2022 (but no negative readings). Baumeister et al. WECI (based on 25 indicators) after adding in a trend shows a similar pattern to the WEI (comparison is shown in appendix to Baumeister et al.)
How did these series interpret the developments during the last recession (Unadjusted WECI shown below).
Figure 3: Lewis-Mertens-Stock Weekly Economic Index (blue), OECD Weekly Tracker (tan), Baumeister-Leiva-Leon-Sims Weekly Economic Conditions Index for US (green). NBER defined recession dates shaded gray. Source: NY Fed via FRED, OECD, WECI, NBER.
The foregoing suggests that as of 8/6, the US is not in a contracting state, as summarized by various underlying macro indicators.