Natixis Weekly Activity Tracker

As far as world affairs go, the last two and a half years have been “ quite interesting ” , not least from a macro-economic point of view. The C ovid crisis (with its subsequent lockdowns), the Ukraine war (with a simultaneous commodity shock) and an aggressive policy tightening path by central banks to combat rampant inflation , have all briskly shaken up the world economy. Some of these shocks are having a very strong impact on national economies in a very short period of time. However, the main indicator to measure the health of an economy, GDP, is still only measured at quarterly frequency; furthermore, the first official estimate is only released one month after the concerned period. There is therefore a need for (i) higher-frequency and (ii) timelier data to measure the level of economic activity. Monthly indicators are providing a timelier view on how things are developing, but the extreme environment seen over the last couple of years has created a demand for an even quicker read on the economy. This need has led many institutions to develop ‘weekly economic activity indices’. Examples of high frequency indicators are the Weekly Economic Index (Lewis et al., 2020) developed by the Federal Reserve Bank of New York and the Bundesbank’s Weekly Activity Index (Wegmueller, 2020). They both rely on extracting the common component via a so-called Principal Component Analysis of a few high-frequency time series. Following a radically different approach, the OECD Weekly Tracker (Woloszko, 2020) estimates the economic activity for 46 different countries using only Google trends data. It uses a neural network that translates Google trends variations into GDP variations with quarterly data, and then feeds it with weekly data to obtain a weekly index. In this report we follow the OECD and develop our own in-house high-frequency index based on Google trends as our input, albeit changing the data pre-processing, model architecture and training. Finally, to better interpret the index, we analyse the economic drivers behind it by quantifying the contribution of different components of the economy to the overall index.