NY Fed’s Predictive GDP Forecast Index Has Been Steadily Declining to Current 1.42% Level

Jan 3, 2023 | Macro Insights, No Bull Economics

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Economic activity is slowing dramatically according to the WEI index, trending towards a recession.

Key Points

The NY Fed’s WEI is an index of real economic activity using timely and relevant high-frequency data. It represents the common component of ten different daily and weekly series covering consumer behavior, the labor market, and production. The WEI is scaled to the four-quarter GDP growth rate; for example, if the WEI reads -2% and the current level of the WEI persists for an entire quarter, one expects, on average, GDP that quarter to be -2% y/y lower.

The decrease in the WEI for the week of 12/24/22 to 1.42% (relative to the final estimate for the week of December 17) is due to a decrease in steel production, and a rise in initial unemployment insurance claims, which more than offset rises in retail sales, tax withholding, consumer confidence, and railroad traffic. Electricity output was not updated due to data unavailability.

Weekly Economic Index and Real GDP Graph
Weekly Economic Index and Real GDP Graph

The WEI is a composite of 10 weekly economic indicators: Redbook same-store sales, Rasmussen Consumer Index, new claims for unemployment insurance, continued claims for unemployment insurance, adjusted income/employment tax withholdings (from Booth Financial Consulting), railroad traffic originated (from the Association of American Railroads), the American Staffing Association Staffing Index, steel production, wholesale sales of gasoline, diesel, and jet fuel, and weekly average US electricity load (with remaining data supplied by Haver Analytics). All series are represented as year-over-year percentage changes. These series are combined into a single index of weekly economic activity.

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