Aruoba-Diebold-Scotti Business Conditions (ADS) Index

The below link discusses a new economic forecast index called the Aruoba-Diebold-Scotti Business Conditions (ADS) Index:

Here is a chart of the index that can be found on the Philadelphia Fed website at this link:


From the above Philadelphia Fed link:

The Aruoba-Diebold-Scotti business conditions index is designed to track real business conditions at high frequency. Its underlying economic indicators (weekly initial jobless claims; monthly payroll employment, industrial production, personal income less transfer payments, manufacturing and trade sales; and quarterly real GDP) blend high- and low-frequency information and stock and flow data. Both the ADS index and this web page are updated as data on the index’s underlying components are released.

The average value of the ADS index is zero. Progressively bigger positive values indicate progressively better-than-average conditions, whereas progressively more negative values indicate progressively worse-than-average conditions. The ADS index may be used to compare business conditions at different times. A value of -3.0, for example, would indicate business conditions significantly worse than at any time in either the 1990-91 or the 2001 recession, during which the ADS index never dropped below -2.0.

The vertical lines on the figure provide information as to which indicators are available for which dates. For dates to the left of the left line, the ADS index is based on observed data for all six underlying indicators. For dates between the left and right lines, the ADS index is based on at least two monthly indicators (typically employment and industrial production) and initial jobless claims. For dates to the right of the right line, the ADS
index is based on initial jobless claims and possibly one monthly indicator.”


At this point, I don’t have a lot to say about this index.  I do find the latest downturn from about mid-August to be notable. 

Also, it would be interesting to see how this index compares historically to the S&P500 as well as the other index and forecasts I have previously discussed on this site such as the ECRI WLI, Fortune Big Picture Index, and Dow Jones ESI.


SPX at 1062.47 as this post is written