The European Business Cycle
Clock
1. Introduction
The Business Cycle
Clock (BCC) of Eurostat is a new graphical interface[1] for
displaying developments of economic key indicators for
In April 2009 Eurostat
has introduced a new version of the BCC comprising new advanced functionalities
as compared to the former BCC.
What’s new?
- Switch indicators/countries: besides a graph displaying all selected indicators for a single country, it is also possible to display a graph showing all selected countries for a single indicator. This dual graphical functionality enables users to view the animated cyclical development across indicators within a country, but also across countries for a given indicator. Many of the indicators show a very similar cyclical pattern across countries, implying strong economic coherence between countries.
- The number of countries and indicators simultaneously shown in the same graph is extended and the user can also define the color setting for the graphical elements.
- The size of the graph can be enlarged by clicking on the
icon. - The graph can be printed
icon. - The graphical animation can be downloaded for running it off-line, i.e. without a connection to the Internet.
2. How does it work?
The BCC covers a wide
field of economic indicators, such as GDP, consumption, investment, exports and
imports, (un-)employment, Economic Sentiment, industrial production, industrial
new orders, inflation, labour costs, producers prices, production in
construction, deflated retail sales. Each of these indicators has been
re-calculated in order to reveal more clearly their multi-yearly cyclical
development. Short-term increases and decreases due to, for instance,
seasonality have been removed from the series. The various steps of calculation
are described in more detail in section 5.1.
The cyclical behaviour
displayed by the graph (see figure 1) distinguishes four phases: (1) the
indicator is above its long-term trend and is increasing, (2) it is still above
the long-term trend, but after having reached a peak it is now gradually moving
downwards, (3) after subsequent decreases it reaches levels below the long-term
trend and is heading into a trough, and (4) gradually picks up again by pulling
itself out of this trough with positive numbers even though still under the
long-term trend. Each of these phases are coloured correspondingly. In general
the indicators move in time like the arrows, evolving from one phase into the
other. Sometimes a full cycle takes around 4 years, other times it could be
more or it could be less; there is no rule of thumb for forecasting cyclical
time span.
Figure 1. Four basic phases of cyclical development
Besides the graph,
users have an overview of the most recent (growth) rates of the indicators and the
countries which have been selected (see figure 2).
Figure 2. Selection pane of countries and indicators,
and their latest values
Here the users can
select the indicators and countries they want to include in the graph, and
define the colour scheme.
The BCC combines both
graph (figure 1) and selection pane (figure 2) into a one page interface
including an animation control below the graph for watching economic evolution
in a dynamic fashion. As can be seen from figure 3 each indicator is
represented by its own graphical symbol, and by mouse-over the symbol the title
of the indicator is highlighted within the graph.
Figure 3. Business Cycle Clock for EU27
In December 2008 the
graph shows that the majority of EU27 indicators are cyclically decreasing and
below the long-term trend. The animation panel below the graph enables the user
to move backwards and forwards in time, watching the business cycle in a
dynamic animated fashion. In general the time series start from 1990 onwards.
For some series data is only available as from 1995. The animation shows that
in some of the indicators are leading the business cycle – such as Economic
Sentiment and Deflated Retail Sales – and some are lagging behind, for example
employment.
With the tabs on top
of the graph (numbererd 1 to 6 and all) the user can immediately switch between
selected countries, and by clicking on the ”all”tab also watch these countries
simultaneously in one graph.
Users can also print the graph or bookmark 
their selection for immediate access later on
or for e-mail purposes. By downloading
the
web page, users are able to run the BCC off-line, i.e. without Internet
connection.
More detailed
information on each indicator can be activated through the four buttons to the
right of each title, opening: a short description; a table with more data, and
customizable graphs and maps. An example (GDP) of these tables, graphs and maps
can be found in the annex.
When clicking the link
Switch indicators/countries the BCC page reverses indicators and countries in
both the graph as well as the right part of the web page (see figure 4).
Figure 4. Business Cycle Clock for GDP for all
European countries
In this graph the
indicators are switched with the countries, such that the graph now displays
all (selected) countries for a single indiactor. Here, GDP has been selected.
The graph reveals a strong interdependency/similarity in the cyclical movement
across countries. This interdependency is even stronger for some of the leading
indiactors such as Economic Sentiment (see figure 5, blue icons).
Figure 5. Business Cycle Clock for GDP (red) and
Economic Sentiment (blue)
3. Current status of the BCC and next
steps of improvement
Eurostat is developing
its new web interfaces such as the BCC in an incremental way, starting with
basic functions – i.e. the current BCC- gradually adding new functions and
improving the look and feel.
In April 2009 Eurostat
has released the second version of the BCC, with several new functionalities
and an enhanced usability (see section 2 for more details).
In the near future the
BCC will include
- New set(s) of indicators besides the
current set of Principal European Economic Indicators.
- A demo for both specialists and more basic
users in order to achieve a better understanding of economics in general
and the business cycle in particular.
4. Some more analytical examples
Figure 6 below highlights
the fact that the cyclical stage of Gross Domestic Product (GDP) is somewhere
in-between the cyclical stages of its building blocks Consumption, Investment,
Imports and Exports. In an open economy such as the
Figure 6. Dutch GDP and its components
An animated comparison
between EU27 (red icons) and the
Figure 7.a. EU27 and the
Figure 7.c. EU27 and the
Mid of 2001, EU27 was
in a similar phase of the business cycle as the
5. Some methodological and technical
notes
5.1 Method of calculation
The graphical data is
based on a re-calculation of seasonally adjusted statistical time series.
Except for prices which are as usual practice not seasonally adjusted. All the
series are either expressed as an absolute index or as an absolute number, i.e.
not as a growth rate. As a first step in the calculation each of the series is
de-trended. As a second step the cyclical component is extracted[2] by the
Christiano-Fitzgerald (CF) band-pass filter. In order to make the cyclical
series mutually comparable in terms of magnitude, each of the series is
normalized so that each has an average of zero and a unit standard deviation.
With this last step of calculation all series fit within the same graphical
frame, without affecting the direction of cyclical development of the
indicator.
Because of these
various steps of re-calculation, the resulting values are only valuable within
the graphical framework of the BCC. These cyclical values do not have their own
meaning like the original statistics do[3]. Real
statistical data, i.e. the original counterpart of the graphical values, are
displayed on the right of the graph. As such the main purpose of the BCC graph
is to help users in a visual way, to create interest, and to offer a doorway to
economic key statistics of
5.2 The BCC application
The BCC is built on open
sources, client-based and runs entirely within the Internet browser with just a
few calls to Eurostat's server. The graphical display is Flash based. For the
data input holding the time series of the indicators, an XML format is used.
The back-end of the BCC system is also compatible with SDMX[4].
Twice a day (11:00 am
and pm) the BCC checks for new data and recalculates its internal cyclical
values accordingly.
In the medium-term
Eurostat intends to make the BCC application generally available to other
(statistical) organisations within the framework of the EU-PL rules of the
European Commission. To a large extent the BCC settings and language(s) can be
modified by changing the configuration files.
ANNEX: Information behind the
table, graph and map buttons of the BCC
The information which
is opened when the users clicks on one of the buttons on the right of the
indicators is shown in the screenshots presented below. The following
screenshots are taken from the GDP indicator. Figure 8 opens with the simple
default table of GDP, which the user can download, print, save, etc, or by
simple clicking create graphs or maps (see figures 8.b. and 8.c.). These
self-created graphs and maps can be printed and saved or bookmarked for later
instant re-use. Here the user can also find a more elaborate methodological
description of the indicator.
Figure 8.a. Table view on GDP for the latest 12 periods
for all countries.
Figure 8.b. Customizable graphs of GDP Figure 8.b. Customizable maps of GDP
