A new index created by Dow Jones is pointing to a recovery in the economy.
NEW YORK, April 30, 2009 – A unique new monthly economic indicator introduced today by Dow Jones offers what could be an early signal that the economy may be lifting off its low point but any recovery remains very tentative.
The Dow Jones Economic Sentiment Indicator (ESI) edged higher in April to 27.6, up from 26.3 in March. The ESI aims to predict the health of the U.S. economy by analyzing the coverage of 15 major daily newspapers in the U.S. It uses a numerical scale from 0 to 100 to express the balance of sentiment in articles about the economy.
The figure for April is still well below the levels of last summer and is the 7th weakest recorded in nearly two decades. The indicator touched a low of 22.2 in November, but has seen a small but steady rise since then.
“The green shoots of recovery may be making an appearance,” Dow Jones Newswires “Money Talks” columnist Alen Mattich said, “but they are as yet very small and very pale.”
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Bear in mind that this appears to be an economic indicator rather than a market indicator. In 2001 when the indicator was calling a bottom you would have been whipsawed when the market retrenched in 2002. Interesting data nonetheless….
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
DanH
Reminds me of the NBER metrics for calling a bottom. Kind of worthless.
Cullen Roche
Yeah, best to take these kinds of stats with a grain of salt. We could very well be seeing an economic bottom, but that by no means says we’re at a market bottom….