Q: Why are some of the indicators designated as “business cycle”?
A: The business cycle indicators all have a strong correlation with the business cycle and have consistently signaled when the economy is growing or slowing or approaching a recession.
Q: At the top of the home page, there is a current economic outlook value. How is this value calculated?
A: In a nutshell, the economic outlook is a weighted average of the business cycle indicators based upon their status relative to historical trends or norms and their relative influence upon the economy. For indicators that are based on economic activity, like corporate profits, comparisons are made to historic trends. An indicator that has an increasing three-months trend, but a decreasing three-year trend, will score lower than an indicator that has an increasing three-month and an increasing three-year trend.
For index measures like consumer sentiment, comparisons are made to historic averages, generally a 20-year average if the data is available.
After a factor is calculated for each indicator, it is weighted by its economic influence. For example, corporate profits are weighted more heavily than vehicle sales because corporate profits have a larger influence on the economy.