Exploring the effects of the Business Confidence Index
The business confidence index tracks output growth and turning points in economic activity
by Kristen Stephenson
Earlier this year, GPEC launched the Economic Monitor, a comprehensive web tool designed to provide timely, actionable insights into the state of the economy. Through an exploration of key economic indicators, the Economic Monitor offers a concise picture of health at both national and regional levels.
Each month, I’m diving into one of the indicators from the Monitor to share in greater detail what the metric measures are, why it matters to the economy and what the current numbers tell us. Last month I discussed the consumer confidence index; this month, we’re going to examine the corresponding business confidence index.
What does the business confidence index measure?
The business confidence index measures businesses’ perceptions of the economy. Much like consumer confidence, business confidence can be tracked in a number of ways such as the Institute for Supply Management’s Purchasing Managers Index or Moody’s Survey of Business Confidence. The economic monitor tracks the Organisation for Economic Cooperation and Development (OECD) Business Confidence Index (BCI).
The higher the index value, the more confident businesses are about economic conditions. In the case of the OECD Business Confidence Index, an index reading above 100 indicates increased confidence in future business performance, while numbers below 100 indicate pessimism towards the future. The index is created based on opinion surveys regarding production, orders and finished goods.
Why does business confidence index matter?
The business confidence index allows us to track output growth and can be used to anticipate turning points in economic activity. A lower business confidence index for example can indicate that businesses anticipate pulling back on production or orders of goods in the near future, which in turn will slow down the economy.
What do the current numbers say?
The most recent OECD business confidence index for the United States shows a reading of 98.7 for October 2023, down one-tenth of a point compared to September 2023. This indicates a mildly pessimistic view of the economy going forward. The index is also down compared to this time last year, when the BCI measured 99.3. Since February, the BCI has not changed much, fluctuating between 98.5 and 98.7, and has not registered above 100 since June 2022, demonstrating some ongoing concern.Track trends in the Economic Monitor
To monitor business confidence trends in real time along with me, mapped alongside 13 other key indicators of health, visit gpec.org/monitor. We hope you find the Monitor a valuable tool in understanding the ever-changing economic landscape.