Lesson 6 of 7 · All lessons in this module
- What a business cycle is: classical, growth and growth rate cycles
- The four phases, recessions and market behaviourVideo lesson
- Credit cycles
- Labour, capital spending, inventories, consumers and housing
- Leading, coincident and lagging indicatorsVideo lesson
- Surveys, big data, nowcasting and diffusion indexes
- Integrated cases: reading the cycle from a data panel
Lesson 6 of 7 · 13 min
Surveys, big data, nowcasting and diffusion indexes
Beyond official statistics, analysts track the cycle with business and consumer surveys, big-data composites built by principal components, real-time nowcasts of current GDP, and diffusion indexes that show how broadly a move is shared.
In short
- Economic tendency surveys of businesses, consumers or experts (e.g. the German ifo, the Bank of Japan Tankan, PMIs) ask mostly qualitative questions about activity, finances and confidence; they often feed composite indicators.
- Big data: the Chicago Fed National Activity Index (CFNAI) distils 85 monthly series and EuroCOIN over 100 series using principal components analysis.
- Nowcasting estimates the current value of slow, late-published variables (GDP, inflation, unemployment) in real time from timely data; the Atlanta Fed's GDPNow is a running estimate of this quarter's real GDP growth.
- A diffusion index measures the breadth of a move: the share of components moving with the index, scored 1 (rising), 0.5 (roughly flat) or 0 (falling), averaged and × 100.
- Diffusion indexes ignore outliers: one component's huge move counts no more than a small move.
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