Real-Time Macroeconomic Monitoring: Real Activity, Inflation, and Interactions

Abstract

The authors sketch a framework for monitoring macroeconomic activity in real-time and push it in new directions. In particular, they focus not only on real activity, which has received most attention to date, but also on inflation and its interaction with real activity. As for the recent recession, the authors find that (1) it likely ended around July 2009; (2) its most extreme aspects concern a real activity decline that was unusually long but less unusually deep, and an inflation decline that was unusually deep but brief; and (3) its real activity and inflation interactions were strongly positive, consistent with an adverse demand shock.

Keywords: Nowcasting, Prices, Wages, Business cycle, Expansion, Contraction, Recession, Turning point, State-space model, Dynamic factor model

JEL Classification: E31, E32, E37, C01, C22