Surprise and uncertainty indexes: Real-time aggregation of real-activity macro-surprises

Two daily, real-time, real-activity indexes are constructed for the United States, euro area, United Kingdom, Canada, and Japan: (i) a surprise index summarizing recent economic data surprises and measuring optimism/pessimism about the state of the economy, and (ii) an uncertainty index measuring uncertainty related to the state of the economy. The surprise index parsimoniously preserves the properties of the underlying series when affecting asset prices. For the United States, the real-activity uncertainty index is compared to other uncertainty proxies to show that, when uncertainty is strictly related to real activity only, it has a potentially milder effect on economic activity.