Written by Steven Hansen
The New York Fed’s Weekly Leading Index (WLI) improved but continues to show an economy that is significantly worse than seen during the Great Recession.
Analyst Opinion of the Weekly Leading Index
This data set should be considered a high-frequency coincident indicator on a par with the Aruoba-Diebold-Scotti Business Conditions Index produced by the Philly Fed – and both show conditions caused by the coronavirus pandemic are already worse than the Great Recession. However, the Aruoba-Diebold-Scotti Business Conditions Index is improving whilst the WLI is still declining. Logic would say with the partial reopening of the economy – the Aruoba-Diebold-Scotti Business Conditions Index seems to be correct.
The WEI is an index of ten daily and weekly indicators of real economic activity scaled to align with the four-quarter GDP growth rate.
The current situation according to the New York Fed:
- The WEI is currently -10.60 percent, scaled to four-quarter GDP growth, for the week ended May 23 and -11.09 percent for May 16; for reference, the WEI stood at 1.58 percent for the week ended February 29.
- Today’s increase in the WEI for the week of May 23 is largely a result of most data releases being delayed by the Memorial Day weekend. The one available release, the Rasmussen Consumer Index, rose modestly, explaining the movement in the WEI. The WEI for the week of May 16 remained unchanged as no additional data have yet been released.
Comparision to the Aruoba-Diebold-Scotti Business Conditions Index
Components of the Aruoba-Diebold-Scotti Business Conditions Index
The Aruoba-Diebold-Scotti business conditions index is designed to track real business conditions at high observation frequency. Its underlying (seasonally adjusted) economic indicators (weekly initial jobless claims; monthly payroll employment, monthly industrial production, monthly real personal income less transfer payments, monthly real manufacturing and trade sales; and quarterly real GDP) blend high-frequency and low-frequency data. The ADS index on this web page is updated in real time as new or revised data on the index’s underlying components are released. Hence at the time of any ADS update, the index is based on all information on all indicators available at that time.
The average value of the ADS index is zero. Progressively bigger positive values indicate progressively better-than-average conditions, whereas progressively more negative values indicate progressively worse-than-average conditions. The ADS index may be used to compare business conditions at different times. A value of -3.0, for example, would indicate business conditions noticeably worse than at any time in either the 1990-91 or the 2001 recession, during which the ADS index never dropped below -2.0.
source: New York Fed
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