Dow Jones Economic Sentiment Indicator Signals Progress in U.S. Economy

NEW YORK, Aug. 2 /PRNewswire/ -- The Dow Jones Economic Sentiment Indicator (ESI) has given an upbeat signal on the economy, registering its biggest rise since October and a return to the level of June 2008.

The ESI rose to 42.3 in July, two points higher than the 40.3 tracked in June 2010. The rise is modest, but it is an acceleration from the slender gains of recent months and implies some recent pessimism about the economy may be misplaced.

"The Dow Jones ESI's rise suggests the prospects of a double dip recession have receded," Dow Jones Newswires "Money Talks" Columnist Alen Mattich said. "The ESI is still at a very low level, just above where it has in the past signalled a drop into recession. The indicator, however, has been steadily climbing since April 2010 which implies continued economic improvement."

The ESI is determined using an economic sentiment analysis algorithm to review news coverage in 15 daily newspapers across the U.S.

Although the index was pulled down by economic news such as reporting of the Federal Reserve's "Beige Book" report with its signals that the recovery is slowing, this was counterbalanced by positive reporting on earnings and the European bank stress tests.

The index was also boosted by local reports indicating that the outlook is not so gloomy. Among them were reports that condominium sales are thawing in downtown Boston, boat sales are recovering in Chicago, and San Francisco is forging ahead with the $1.6 billion Transbay transit terminal.  

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 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.

SOURCE Dow Jones & Company