The Bloomberg U.S. Economic Surprise Index measures the degree to which U.S. economic data releases surprise to the upside or downside relative to market expectations.
It is an objective and quantitative measure that aggregates the differences between actual economic data and the median forecast from Bloomberg surveys of economists.
The index is constructed using weighted historical standard deviations of data surprises across various economic indicators.
Each economic data release is compared to the consensus estimate, and the difference is standardized.
- A positive reading indicates that economic data have, on average, been better than expected.
- A negative reading indicates that data have been worse than expected.
How is the Bloomberg U.S. Economic Surprise Index calculated?
The Bloomberg U.S. Economic Surprise Index is constructed using the following steps:
- The index compiles various U.S. economic indicators, including employment numbers, GDP growth, inflation rates, and consumer confidence.
- Each economic data release is compared against the consensus estimate derived from Bloomberg surveys of economists.
- The difference between the actual data and the consensus forecast is standardized by the historical standard deviation of the surprises.
- These standardized surprises are then aggregated, with weights assigned based on the importance and frequency of the economic indicators.
The index is based on market expectations, which can change rapidly. It also doesn’t capture all aspects of the economy, so it should be considered alongside other economic indicators.
How is the Bloomberg U.S. Economic Surprise Index used?
The index helps market participants understand whether economic conditions are generally exceeding or falling short of expectations.
It is used by investors and analysts to gauge market sentiment and to adjust their expectations and strategies accordingly.
Economists and policymakers monitor the index to assess whether monetary policies are having the intended effects or if adjustments are needed.
How is the Bloomberg U.S. Economic Surprise Index interpreted?
A consistently positive index suggests a robust economic environment where economic releases are beating expectations.
Conversely, a negative index might indicate economic weakness or deteriorating conditions as releases fall short of forecasts.
The Bloomberg Economic Surprise Index is similar to the Citigroup Economic Surprise Index, which tracks economic data surprises relative to consensus forecasts, providing insight into market reactions and economic growth trends.