Business cycle surveys - Methodology
Speaking about business cycle surveys...
Business cycle surveys carried out in the enterprise sphere are an important source of information in the countries the economy of which is based on market relations; they provide information on expected tendencies in the development of main areas of business economy in the nearest future. They are important especially because they show the atmosphere in enterprise environment and provide information well in advance and thus serve to identification of turning points in economy and provide information also for such areas that are difficult to describe by quantitative indicators. They are based on the opinions of entrepreneurs operating in industry, construction, trade and selected services, and provide information on how entrepreneurs assess the current situation and what their expectations are over the next few months. In this sense, they have been organized and used for decades in countries with advanced market economies.
The purpose of the business survey among consumers is to collect information on households' spending and saving intentions and in this context to assess how consumers perceive the factors influencing these decisions (their current / expected financial situation, the development of consumer prices, the development of unemployment, and others).
A common feature of business surveys is that the answers usually do not provide direct quantification, but evaluate the present and the expected future using more general terms – e.g. increase, remain unchanged, decrease.
The evaluation of the results is performed by summarizing the answers in the offered variants, while the result is the business cycle balance, i.e. the difference between the weighted number of positive and negative answers to a specific question, expressed as a percentage. The higher the positive balance of answers, the more optimistic (exceptionally more pessimistic) it is possible to evaluate the obtained answer.
The Czech Statistical Office (CZSO) not only calculates confidence indicators between entrepreneurs and consumers separately, but also publishes the Composite confidence indicator (Economic Sentiment Indicator), which in a way summarizes business and consumer confidence. Sometimes these indicators are called "leading indicators".
Most of the questions surveyed in the business cycle surveys are harmonized in accordance with the methodology managed by the European Commission's Directorate-General for Economic and Financial Affairs (DG ECFIN), which also co-finances the surveys.
Since business surveys are an important part of the information system used at European Union level to monitor economic trends, they are included in the priorities for macroeconomic statistics.
Methodological explanatory notes
The Composite confidence indicator (Economic Sentiment Indicator, ESI) is a weighted average of seasonally adjusted confidence indicators in industry, construction, trade, in selected services and of the Consumer confidence indicator (CCI).
The Business confidence indicator is a weighted average of seasonally adjusted confidence indicators in industry, construction, trade and in selected services.
The sectoral confidence indicators are constructed as averages of seasonally adjusted weighted business cycle balances. The business cycle balance is the percentage difference between the responses “growth (+)” and “fall (-)” expressed in%.
The weights for calculating balances are total turnover and for employment indicators the number of employees.
The Confidence indicator in industry is the arithmetic average of seasonally adjusted balances of the following three indicators:
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Do you consider your current overall order books to be…? (more than sufficient, sufficient, not sufficient),
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Do you consider your current stock of finished products to be…? (too large, adequate, too small),
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How do you expect your production to develop over the next 3 months? It will… (increase, remain unchanged, decrease)
The Confidence indicator in construction is the arithmetic average of seasonally adjusted balances of the following two indicators:
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Do you consider your current overall order books to be…? (more than sufficient, sufficient, not sufficient),
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How do you expect your firm´s total employment to change over the next 3 months? It will… (increase, remain unchanged, decrease)
The Trade confidence indicator is the arithmetic average of seasonally adjusted balances of the following three indicators:
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How has your business activity developed over the past 3 months? It has… (improved, remained unchanged, deteriorated),
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Do you consider the volume of stock currently hold to be…? (too large, normal for the season, too small),
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How do you expect your business activity to change over the next 3 months? It will… (improve, remain unchanged, deteriorate)
The Confidence indicator in selected service sectors is the arithmetic average of seasonally adjusted balances of the following three indicators:
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How has your business situation developed over the past 3 months? It has… (improved, remained unchanged, deteriorated),
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How has demand (turnover) for your company´s services changed over the past 3 months? It has… (increased, remained unchanged, decreased),
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How do you expect the demand (turnover) for your company´s services to change over the next 3 months? It will… (increase, remain unchanged, decrease)
The Consumer confidence indicator was until December 2021 calculated from seasonally adjusted balances of the following four questions/indicators:
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How do you expect the financial position of your household to change over the next 12 months? It will… (get a lot better; get a little better; stay the same; get a little worse; get a lot worse; don’t know),
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How do you expect the general economic situation in this country to develop over the next 12 months? It will… (get a lot better; get a little better; stay the same; get a little worse; get a lot worse; don’t know),
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How do you expect the number of people unemployed in this country to change over the next 12 months? The number will… (increase sharply; increase slightly; remain the same; fall slightly; fall sharply; don’t know),
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Over the next 12 months, how likely is it that you save any money? (very likely; fairly likely; not likely; not at all likely; don’t know).
From January 2022, in accordance with the harmonized methodology of DG ECFIN, CCI consist of the following questions:
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How has the financial situation of your household changed over the last 12 months? It has… (got a lot better; got a little better; stayed the same; got a little worse; got a lot worse; don’t know),
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How do you expect the financial position of your household to change over the next 12 months? It will… (get a lot better; get a little better; stay the same; get a little worse; get a lot worse; don’t know),
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How do you expect the general economic situation in this country to develop over the next 12 months? It will… (get a lot better; get a little better; stay the same; get a little worse; get a lot worse; don’t know),
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Compared to the past 12 months, do you expect to spend more or less money on major purchases (furniture, electrical/electronic devices, etc.) over the next 12 months? I will spend… (much more; a little more; about the same; a little less; much less; don’t know).
In connection with the adjustment described above, the time series of the Consumer Confidence Indicator and the Economic Sentiment Indicator, which it enters into, were recalculated. For more information on adjusting the calculation of the Consumer Confidence Indicator, see the methodological commentary here.
The composite confidence indicator and business confidence indicator are constructed on the basis of the following weighting system: the Confidence indicator in industry is assigned a weight of 40%, the Confidence indicator in construction and trade are assigned weights 5% each, the Confidence indicator in selected services is assigned a weight of 30% and the Consumer confidence indicator is assigned a weight of 20% in The Composite confidence indicator. The Services confidence indicator enters the CCI and ESI, respectively since May 2002 (start of the business cycle survey in selected services).
Since January 2020, the basis for the calculation of published basic indices has been the long-term average for the period January 2003 to December T-1, where T is the current year (for 2022 this is the average for the period 2003-2021).
Since May 2010, the results are in compliance with the harmonised programme of business and consumer surveys in the EU compiled according to the new CZ-NACE classification (national version of NACE Rev. 2), which replaced the former classification CZ-NACE (OKEČ, the national version of NACE Rev. 1.1). The changes concern all data except the consumer confidence indicator. Exhaustive information on the introduction of this classification is available at: https://www.czso.cz/csu/czso/klasifikace_ekonomickych_cinnosti_cz_nace.
Data source for business cycle surveys are the CZSO surveys among businesses and the survey carried out among consumers by the research agency Data Collect. Business cycle surveys are carried out monthly, some questions with quarter and half-year periodicity.
Results are published immediately after processing in the form of News Releases and time series on the CZSO website: www.czso.cz, see section Business Cycle Surveys.
