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Tuesday
Dec042012

The Bespoke Economic Indicator Diffusion Index

Our Economic Indicator Diffusion Index (shown below) measures the pace at which economic indicators are coming in ahead of (or below) estimates over a 50-day period, and it provides a nice illustration of how the economy is playing out compared to expectations.   Positive readings indicate an economy surprising to the upside, while negative readings are representative of an economy failing to live up to expectations.

This past fall was certainly a period where economic data consistently exceeded economists’ forecasts.   After bottoming out at negative 20 in late June, the Diffusion index reversed higher and rose as high as positive 21 in early November.  As shown below, over the last few weeks, the Diffusion index has...

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