A new index of macroeconomic uncertainty for Italy

March 7, 2019

In this dataviz, we present a new macroeconomic uncertainty indicator developed by Prometeia and show how this indicator is correlated to the recent economic evolution. The figure shows the daily development (red line) of the index and how it reflects certain important political (and non-political) events.

The index builds on news texts and sentiment analysis, i.e., a measure of the distribution of heterogeneous sentiment levels (positive, uncertain and negative, depicted also in the figure). In particular, it shows the recent reduction in the level of measured uncertainty following European Commission agreement related to the 2019 budget, in late December 2018.


However, the risk premium required by investors in Italian sovereign bonds (represented in the figure by the BTP-Bund spread, black line) remains high despite lower public perception of macro uncertainty. This might suggest that the perception of uncertainty by the public in response to media reports, may have abated, but the level of uncertainty perceived by market participants has not.

The figure shows, also, that the macroeconomic uncertainty indicator is correlated to the BTP-Bund spread, but with a lag. If this correlation holds, we should expect public perception of macro uncertainty to increase in the near future - indeed, this is already beginning to happen.