1 Sentiment Indicators in tracking economic trends Introduction Gyorgy Gyomai OECD Statistics Directorate Scheveningen, December 2009

2 Outline Why do we rely on sentiment (tendency) indicators? Data collection and dissemination by the OECD Standardization of the results Harmonization of the surveys and International co-operation in the field

3 Why collect sentiment indicators? Good standalone indicators: –Timely –Often leading –Barely revised Can fit in macro-models and composite leading indicators Model and understand expectation formation

4 Data collection Countries covered: –OECD countries except Iceland –Enhanced engagement economies (Brazil, China, South Africa + India, Indonesia and the Russian Federation targeted) –Preparation have been done for 5 OECD accession countries: Chile, Estonia, Israel, the Russian Federation and Slovenia. Sectors and subjects: –Manufacturing, Construction, Retail Trade, Services and Consumers –Orders, Production (Activity), Stocks, Employment, Prices, Capacity utilization –Qualitative questions (tendency, future tendency, level assessment )

5 Dissemination OECD data are updated and released in the first full week of each month and refer to T-1 Part of the monthly Main Economic Indicators (MEI) publication Available in OECD.Stat (OECD’s data warehouse):

6 Standardized Business and Consumer Confidence Indicators Goal: –ensure comparability across countries –comparability with indicators of the OECD composite leading indicator system –providing zone aggregates Source: –based on a headline composite indicators, or –proxies if the composite is not available Manipulations: –frequency conversion (if needed Q->M) –smoothing (by MCD) –rescaling

7 Survey harmonization Challenges: –the surveying organization varies from country to country: private institutes, chambers of commerce and industries, universities, central banks, statistics offices –risks and costs for changing established surveys, costs for setting up new surveys Current state (OECD report, CIRET-metadata page) Methodology documents (see below the thematic OECD websites) Regular fora for discussing sentiment indicators: –biennial EC-OECD Workshop on Business and Consumer Opinion Surveys (stronger practitioner aspect) –biennial CIRET conferences (research focus)

8 Survey harmonization History: – Harmonization work for transition economies. Joint OECD/EC/Eurostat efforts to develop and harmonize surveys in Central and Eastern Europe and the New Independent States –Co-operation with UN ESCAP in the Asia-Pacific region –Co-operation with UN ECLAC in Latin America OECD websites: Business Cycle Analysis portal: International Development Work and Co-ordination portal: 54_1_1_1_1,00.html 54_1_1_1_1,00.html