A Monthly Business Cycle Indicator for Ireland

Thomas Conefrey and Joëlle Liebermann ()

No 03/EL/13, Economic Letters from Central Bank of Ireland

Abstract: This Letter describes the construction of a new monthly business cycle indicator of the Irish economy. The index of economic activity draws information from a range categories of data covering output, income, employment, external demand and credit. A statistical method is used to extract a single factor from this panel of variables which is common to each of the series and explains most of the variation across all the data. The index captures the steep decline in economic activity at the height of the financial crisis and the recovery which has taken place since 2010. The weak external environment and subdued domestic demand since the beginning of 2013 is reflected in a decline in the index over recent months. The coincident indicator can be updated regularly to provide analysts and policymakers with a timely assessment of the current state of the economy.

Date: 2013-09
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