TheDNB business cycle indicator provides insight into the economic outlook in the short term. Unlike the DELFI forecasts of the economic developments in the medium term (two to three years in advance), theDNB business cycle indicator aims to identify turning points in the Dutch business cycle, covering at maximum seven months forward.
Realisation and forecast
TheDNBbusiness cycle indicator consists of two series: the realisation of the business cycle and its expected development in the near future. The realisation of the business cycle is based on monthly industrial output data. Given its international orientation, the Dutch industrial sector is an important measure of the Dutch business cycle, which is largely influenced by the international environment. The indicator of the future business cycle is drawn from consumer and producer surveys, financial indicators and export indicators.
Phases in the business cycle
TheDNBbusiness cycle indicator distinguishes four phases in the business cycle. A cyclical peak is followed by a cooling down phase, during which economic growth lags the potential growth rate (the growth that the economy can sustain on average in the long term), but economic activity is still above trend. As soon as the indicator falls below trend, the business cycle enters a downturn. This phase ends in a cyclical trough, after which the economy moves into the recovery phase. Economic growth outpaces the potential growth rate during the recovery phase, but economic activity remains below trend. When the economy again performs above this level, the economic boom phase commences. This phase ends in a cyclical peak and the cycle subsequently begins anew.
