Dow Jones Economic Sentiment Indicator Jumps to 43.9
October Gain Unusually Strong for Election Year, Follows Significant Drop in September
NEW YORK, Nov. 1, 2010 /PRNewswire/ -- The Dow Jones Economic Sentiment Indicator (ESI) jumped 3.2 points to 43.9 in October, an unusually strong gain. In back-testing through 1990, election year Octobers averaged a 0.3 point rise. The ESI is now at its highest point since December 2007.
October's gain, however, was preceded by a 2.5 point drop in September. The ESI's turbulence implies that the economy is teetering between a slow climb up and a relapse.
"The Dow Jones ESI rebounded in October from its dip the previous month, resuming a modest upward trend seen during much of the year," Dow Jones Newswires "Money Talks" Columnist Alen Mattich said. "The indicator, however, is still well below levels seen during normal expansions. The October number was not particularly boosted by press coverage of impending quantitative easing from the Federal Reserve or from any one off factors, supporting the view that it reflects self sustaining growth in the economy."
The ESI is determined by in-depth analysis of national news coverage across 15 daily newspapers.
October's gain was propelled by generally more upbeat sentiment in news reporting, with articles about the election not having a significantly more negative tone than other types of coverage. The exception was articles focusing more narrowly on the Tea Party movement, as these articles had a significantly more negative tone than other election coverage.
Articles that aided the ESI's rise were coverage of a strong home rentals market in Houston, BMW expanding in South Carolina, and a new sales and marketing drive by Guinness founded on the belief that beer drinkers will pay more for a stronger, upmarket brew.
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.
SOURCE Dow Jones & Company
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