The Daily Economic Indicator: tracking economic activity daily during the lockdown

Area of Science:

• Economics
• Econometrics
• Data Science

Background:

• The COVID-19 pandemic highlighted limitations of traditional economic statistics due to their low frequency and reporting lags.
• There is an urgent need for high-frequency indicators to monitor economic developments in real-time.

Purpose of the Study:

• To propose a novel daily economic indicator for tracking economic activity in Portugal.
• To utilize non-traditional data sources and a factor model framework for high-frequency economic analysis.

Main Methods:

• Development of a daily economic indicator using a factor model.
• Incorporation of high-frequency, non-traditional data sources.
• Analysis of daily economic series without further smoothing to capture sudden changes.

Main Results:

• A sudden and sharp decline in economic activity was identified in mid-March 2020.
• This drop coincided with the declaration of lockdowns due to the COVID-19 pandemic.
• The novel indicator successfully captured timely changes in economic activity.

Conclusions:

• The proposed daily economic indicator effectively tracks real-time economic activity.
• This approach addresses the complexities of high-frequency data, enabling timely identification of economic shifts.
• The indicator provides a valuable tool for monitoring economic impacts during crises like the COVID-19 pandemic.