Wednesday, July 21, 2010

Anxious Index

The Anxious Index is published by the Federal Reserve Bank of Philadelphia and refers to the probability of a decline in real GDP, as reported in the Survey of Professional Forecasters. The survey asks panelists to estimate the probability that real GDP will decline in the quarter in which the survey is taken and in each of the following four quarters. According to the Philly Fed the Anxious Index is the probability of a decline in real GDP in the quarter after a survey is taken. For example, in the survey taken in the second quarter of 2010, the anxious index is 9.81 percent, which means that forecasters believe there is a 9.81% chance that real GDP will decline in the third quarter of 2010.

From The Blog of HORAN Capital Advisors

In looking at the index over time beginning in the fourth quarter of 1968, the index often goes up just before recessions begin. For example, the first quarter survey of 2001 (taken in February) reported a 32% anxious index; the National Bureau of Economic Research subsequently declared the start of a recession in March 2001. The anxious index peaks during recessions, then declines when recovery seems near. For example, the index fell to 14 percent in the second quarter of 2002, when economic indicators began improving.

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