Asking the Decision-Makers: Eight Surveys and Activity Gauges of Economic Mood

Households come first. This index comes from telephone surveys of a nationally representative sample of households, conducted continuously since 1978 on a survey that dates to 1946, and asks about personal finances, business conditions and buying conditions. Its inflation-expectations component is watched closely by the Federal Reserve as a sign of whether the public still expects inflation to stay under control.

The National Federation of Independent Business turns a mail survey of a random sample of its member firms into an equally weighted average of ten seasonally adjusted components, including expansion plans, expected sales, hiring plans and capital spending. It has been issued monthly since January 1986, and it speaks for the small firms that are a major source of job creation.

Here the respondents are purchasing and supply executives across the US services sector, from finance and healthcare to retail and construction. Introduced in 1998 to complement the Manufacturing PMI, it uses the same 50 threshold between expansion and contraction, and many economists treat it as the more important gauge because services dominate the modern economy.

A regional Federal Reserve bank asks manufacturing executives in Delaware, southern New Jersey and eastern and central Pennsylvania whether new orders, production, employment and delivery times are rising or falling. Launched in 1968, it is the longest running manufacturing survey of any regional Reserve bank, and its early release makes it an advance signal of factory conditions.

The path crosses to Germany with a survey of around nine thousand companies in construction, manufacturing, wholesale and retail, who rate their current situation and their expectations for the coming months. Published by the Munich based Ifo Institute since 1972, it is read as an early indicator of German business sentiment.

Where Ifo asks companies, this German indicator asks up to three hundred experts from banks, insurers and corporate finance departments for their six month outlook. It is calculated as the share who are optimistic minus the share who are pessimistic, so it runs from negative one hundred to positive one hundred, with readings above zero meaning net optimism.

The surveys end here and a composite begins. This index is a weighted average of eighty five existing monthly indicators in four groups: production and income, employment and hours, consumption and housing, and sales, orders and inventories. It is built to average zero, so a positive reading means growth above trend, and research has found it often signals turning points in the business cycle.

The path closes on a physical measure. The Federal Reserve publishes the share of industrial capacity in manufacturing, mining and utilities that is actually in use. A rate persistently below its long-run average signals slack and disinflationary pressure, while a rate above roughly 80 percent has historically gone with rising inflationary pressure as factories near their output limits.