Chart of the Week: A spike in uncertainty

Uncertainty about economic policy, globally, has risen in recent weeks. Most readers would probably accept that, without needing statistical confirmation. Nevertheless, it can be informative to quantify uncertainty, both through time and across countries. That is what this week’s chart tries to do, using data from www.policyuncertainty.com made available on Datastream. Its approach is based on a word count of newspaper articles. It shows, perhaps unsurprisingly, that uncertainty about economic policy has risen most dramatically in Canada; a country that exports around 20% of its GDP to the US in the form of goods, and is now facing a 25% tariff on the 60% or so of those exports that are not covered by the USMCA trade agreement. By March, economic policy uncertainty was at or close to record highs in most countries. It is likely to have risen further in April, following the tariff announcements both on 2 April, and in the days that followed. Economic policy uncertainty may fall back rapidly over the next few weeks and months. But if it does not, then according to an empirical study published by the authors of the dataset, industrial production is likely to fall significantly, particularly in Canada.

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The views expressed in this article are the views of the author, not necessarily those of LSEG.

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