Research Discussion Paper – RDP 2003-01 Business Surveys and Economic Activity Abstract

In this paper we examine the information content of business survey information, focusing in particular on some of the characteristics of the net balance statistic. A number of Australian business surveys are appraised. Four aspects are examined: the extent to which surveys are correlated with economic variables that they are designed to track; advantages in terms of timeliness; the degree to which surveys are forward or backward-looking; and the ability of business surveys to pick turning points. In summary, the business conditions (including sales/output), employment and selling prices components of the business surveys seem to provide the most information, and to a lesser extent the component relating to corporate profitability. Taken together, the surveys can provide useful coincident information on the economy with some advantage in terms of timeliness. The recommended approach to the use of business surveys is to extract common themes and not place too much weight on a single result.

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