Dow Jones Economic Sentiment Indicator Drops Slightly to 38.1; Slump Signals Continued Weakness in U.S. Economy

NEW YORK, March 1 /PRNewswire/ -- Stories of "recession-friendly" celebrations of Valentine's Day and "recession tourism" underscored the media's sentiment about a faltering U.S. economic recovery and contributed to a drop in the Dow Jones Economic Sentiment Indicator (ESI) for February to 38.1.  This represents a slight drop from January's 38.8 and comes after two months of weak performance for the ESI.

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 to look for positive and negative sentiment about the economy in every article.  

"The ESI has been signaling for three months that the US economy's recovery is running out of steam, a prediction that has now been echoed by other recent surveys and data," Dow Jones Newswires "Money Talks" columnist Alen Mattich said.  "This month's figure offers confirmation of this and little hope that the setback will be over quickly. It also suggests a relapse in unemployment in the short-term."

Some of the more volatile monthly data is now reinforcing this message of weakness. The Conference Board index of consumer confidence released last week was far lower than analysts expected and new home sales plunged in January.

In September 2009, the indicator's most recent negative month, the fall was followed in days by very weak monthly employment data, with unemployment rising to 10.2%, its highest level in 26 years.

The ESI represents one of the most comprehensive and far-reaching examinations of media coverage as an economic indicator.  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.

Unlike some other indicators where 50 is a clear break-point between recession and recovery, the ESI needs to be read with reference to longer trends.  Based on the ESI's performance since 1990, previous recoveries have been marked by substantial month-to-month gains, with a jump of three points seeming to be a sign of significant improvement.  A drop below 50 marks the point at which there is a clear risk of a slowdown.

The Dow Jones Economic Sentiment Indicator is calculated using a proprietary algorithm through Dow Jones Insight, a media tracking and analysis tool. More information about the Economic Sentiment Indicator and its development is available at http://dowjones.com/esi .

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) (Nasdaq: NWSA) (ASX: NWS) (ASX: NWSLV) 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, MarketWatch and Dow Jones Indexes. Its Local Media Group 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

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