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Dow Jones Economic Sentiment Indicator Creeps Up Amid Positive Local News; Small Improvement Over July Suggests Progress is Slowing
NEW YORK (Profitable.com) In August, the Dow Jones Economic Sentiment Indicator (ESI) rose less than one point signalling that the economic recovery continues despite a slow August.
The ESI registered at 43.2 in August, up slightly from the 42.3 tracked in July 2010. The rise is sluggish compared to last month when the ESI jumped more than two points, registering its largest gain since October 2009.
“The ESI’s stability during recent months belies some of the recent weakness seen in other sentiment surveys and suggests that the underlying momentum of the U.S. economy, including employment, remains positive,” Dow Jones Newswires “Money Talks” Columnist Alen Mattich said. “However, the ESI remains well below the 50-plus levels that characterize normal expansions. This relative weakness suggests it would take little to push the economy back into recessionary conditions.”
The ESI is determined using an economic sentiment analysis algorithm to review news coverage in 15 daily newspapers across the U.S.
Positive reporting on corporate earnings, increasing interest in the public markets as household names such as Skype SA and General Motors plan initial public offerings and encouraging local and sector-specific stories contributed to the ESI’s modest improvement.
News of record low new-home sales was counterbalanced by stories covering local real estate rebounds, including an up tick of home sales in the Hamptons and a bidding war over the John Hancock Tower in Boston. Thanks to strong aircraft orders, the transportation industry showed strength despite overall weakness in durable good orders.
The Dow Jones Economic Sentiment Indicator aims to predict the health of the U.S. economy by analyzing the coverage of 15 major daily newspapers in the U.S. Using a proprietary algorithm and derived data technology, the ESI examines every article in each of the newspapers for positive and negative sentiment about the economy. The indicator is calculated through Dow Jones Insight, a media tracking and analysis tool. The technology used for the ESI also powers Dow Jones Lexicon, a proprietary dictionary that allows traders and analysts to determine sentiment, frequency and other relevant complex patterns within news to develop predictive trading strategies.
The ESI’s back-testing to 1990 shows that the ESI clearly highlighted the risk that the U.S. economy was sliding into recession in 2001 and 2008 and suggests the indicator can help predict economic turning points as much as seven months in advance of other indicators. More information about the Economic Sentiment Indicator and its development is available at http://dowjones.com/esi .
About Dow Jones Insight
Dow Jones Insight (http://www.dowjones.com/product-djinsight.asp) uses innovative text mining and analytic technologies to help organizations keep informed about relevant issues, news, conversations and trends emerging in mainstream, Web and social media. Dow Jones Insight’s global content collection includes more than 25,000 news and information sources as well as blogs, message boards, and posts from YouTube and Twitter.
About Dow Jones
Dow Jones & Company (www.dowjones.com) is a News Corporation company (Nasdaq: NWS, NWSA; ASX: NWS, NWSLV; www.newscorp.com) and a leading provider of global news and business information. Its principal products include The Wall Street Journal, Dow Jones Newswires, Dow Jones Factiva, Barron’s and MarketWatch. Through its Local Media Group, Dow Jones operates community-based newspapers and Web sites. Dow Jones also provides news content to television and radio stations.
The Dow Jones Economic Sentiment Indicator is provided for analysis purposes only and Dow Jones makes no representation that the indicator is a definitive predictor of sentiment or the health of the U.S. economy. This report does not in any way reflect an opinion of Dow Jones regarding the U.S. economy or the suitability of any investments.