1

Calculation of Normalised

Business and Consumer Confidence Indicators

and Zone Aggregates

Olivier Brunet

OECD Statistics Directorate

2

Topics

National indicators for zones Methodology Publication of results Alternative approaches for zones Comparison with World and Euro confidence indicators Conclusions and future work

3

National indicators for zones (Manufacturing)

Zones Confidence Indicator Business Situation

Monthly Quarterly Monthly Quarterly

Major 7 (7) 5 Canada Japan

Euro area (12) 12

OECD Total (29) 23 Canada 5

Major Asia Pacific (7) India

Indonesia

5

Big 6 Non OECD (6) Russia 3 Brazil China

World (35) 24 4 7

4

National indicators for zones (consumer)Zones Monthly Quarterly No indicator

Major 7 (7) 6 Japan

Euro area (12) 12

OECD Total (29) 24 Japan

New Zealand Switzerland

Norway

Turkey

Major Asia

Pacific (7)

Australia, Korea, China

Japan

New Zealand

India

Indonesia

Big 6 Non OECD (6) China

Brazil

South Africa India

Indonesia

Russia

World (35) 26 4 Norway, Turkey, India, Indonesia, Russia

5

Methodology

Periodicity

1. Quarterly data refer to the first month of the quarter

2. Quarterly data refer to second month of the quarter

3. Quarterly data refer to second month of the quarter with 3rd last month extrapolated

4. Quarterly data refer to third month of the quarter

6

Methodology (following)

Smoothing

- MCD (Months for cyclical Dominance)

- QCD (Quarter for Cyclical Dominance)

Standardisation / Normalisation

Substract the mean and then divide by the mean of the absolute values of the differences from the mean.

7

Methodology (following) Weighting (GDP-PPP)

Manufacturing Consumers

Germany 5.0 5.8

India 7.2 -

Japan 8.1 9.4

China 15.3 17.7

United States 25.0 28.9

Euro area 18.5 21.4

Non OECD Big 6 31.5 22.7 (3)

Major Asia Pacific 35.9 31.2

OECD Major 7 51.3 59.4

OECD Total 68.3 77.3

8

Methodology (final)

Aggregation

- 90 % of total weight for Major 7 countries

- 60 % of total weight for other zones:

. OECD total

. Euro area

. Big 6 Non OECD area

. World proxy

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Publication of results (manufacturing)

Coverage of total

components

Frequency of components

Share of quarterly

components

Starting date

M Q

Euro Area 100.0 12 0 0.0 1985

OECD Major 7 100.0 5 2 25.1 1985

OECD Total 100.0 23 6 25.9 1987

Major Asia Pacific 100.0 0 7 100.0 1997

Big 6 non OECD 100.0 1 5 90.4 1998

World 100.0 24 11 42.7 1998

10

Publication of results (consumers)

Coverage of total

components

Frequency of components

Share of quarterly

components

Starting date

M Q

Euro Area 100.0 12 0 0.0 1987

OECD Major 7 100.0 6 1 19.5 1985

OECD Total 97.1 24 3 15.5 1994

Major Asia Pacific 75.2 3 2 76.9 1995

Big 6 non OECD 62.2 2 1 3.5 1995

World 86.5 26 4 9.9 1994

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Publication of results (manufacturing)

World Business Confidence: Manufacturing Ratio to Trend

96

97

98

99

100

101

102

Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05

96

97

98

99

100

101

102

World

OECDTotal

Big6NonOECD

12

Publication of results (manufacturing)World Business Confidence: Manufacturing

Ratio to Trend

97

97.5

98

98.5

99

99.5

100

100.5

101

101.5

102

Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05

97

97.5

98

98.5

99

99.5

100

100.5

101

101.5

102

MajorAsiaPacific

World

EuroArea

13

Publication of results (manufacturing)

OECD Business Confidence: Manufacturing Ratio to Trend

95

96

97

98

99

100

101

102

103

104

Jan-85 Jan-87 Jan-89 Jan-91 Jan-93 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05

94

95

96

97

98

99

100

101

102

103

104

United States

Japan

EuroArea

14

Publication of results (consumers)World Consumer Confidence

Ratio to Trend

97

98

99

100

101

102

103

Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05

97

98

99

100

101

102

103

OECDTotal

EuroArea

World

15

Publication of results (consumers)World Consumer Confidence

Ratio to Trend

96

97

98

99

100

101

102

103

Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05

96

97

98

99

100

101

102

103

MajorAsiaPacific

World

EuroArea

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Publication of resultsManufacturing and consumers

Business and Consumer Confidence for OECD Major 7 Area Ratio to Trend

97

98

99

100

101

102

103

Jan-85 Jan-87 Jan-89 Jan-91 Jan-93 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05

97

98

99

100

101

102

103

BusinessOECDMajor7

ConsumerOECDMajor7

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3 Alternative Approaches

Series name De-trending Normalisation Weigthing

EC EuroAreaEC No No Changing every year

OECD 1 EuroArea

OECDRT

Yes Yes Fixed

OECD 2 EuroArea

OECD

No Yes Fixed

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Euro Area Industrial Business Confidence: Alternative Calculations Ratio to Trend

96

97

98

99

100

101

102

103

Jan-85 Jan-87 Jan-89 Jan-91 Jan-93 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05

96

97

98

99

100

101

102

103

EuroAreaEC

EuroAreaOECD

EuroAreaOECDRT

19

Euro Area Consumer Confidence: Alternative Calculations Rati to Trend

96

97

98

99

100

101

102

103

Jan-85 Jan-87 Jan-89 Jan-91 Jan-93 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05

96

97

98

99

100

101

102

103

EuroAreaEC

EuroAreaOECDRT

EuroAreaOECD

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Comparison of World and Euro area confidence indicators

Indicator Share of

GDP-PPP

Sector De-trending

Normalisation

Weighting

World WES (90)

95.4 Economy No No Fixed trade weights

Euro WES (12)

100 Economy No No Fixed trade weights

Euro EC

(12)

100 MFG No No Changing yearly GDP-PPP weights

World OECD (35)

83.1 MFG No Yes Fixed GDP-PPP weights

OECD Total (29)

100 MFG No Yes Fixed GDP-PPP weights

Euro OECD (12)

100 MFG No Yes Fixed GDP-PPP weights

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World Business Confidence IndicatorsWorld Business Confidence Indicators

Ratio tro Trend

97

98

99

100

101

102

103

Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05

97

98

99

100

101

102

103

WorldWES

WorldOECD

OECDTotal

22

Euro area Business Confidence IndicatorsEuro Area Business Confidence Indicators

Ratio to Trend

95

96

97

98

99

100

101

102

103

104

Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05

95

96

97

98

99

100

101

102

103

104

EuroAreaWES

EuroAreaEC

EuroAreaOECD

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Conclusions

Publication of results:– Business confidence indicators (manufacturing)

(Euro Area, Major 7, OECD Total, OECD Asia Pacific, Big 6 Non EODC, World proxy)– Consumer confidence indicator

(Euro Area, Major 7, OECD Total)

Methodology:– Use of the option de-trending

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Future work

Calculation of country specific business confidence indicators for Non EU countries

Incorporation of consumer confidence indicator (India, Indonesia, Russia)

Extension of calculation of zone aggregates (NAFTA , Big 4 European, OECD Europe, EU15, OECD Asia, ..)

Calculate regional or zone confidence indicators for other sectors

Use of alternative weights (ex: share of imports and exports)