Economic Climate Indicator in Portugal

The Economic Climate Indicator condenses into a single index the business confidence of the four sectors surveyed by Portugal's INE (manufacturing, trade, construction and public works, and services). Unlike a simple average, it is estimated by factor analysis and calibrated against GDP growth.

INE combines the extreme-response balances of the four sectoral business surveys through factor analysis; the resulting series is smoothed with a three-month moving average (seasonally adjusted) and calibrated against real GDP growth in volume terms.

It is INE's benchmark leading indicator for the Portuguese business cycle: sustained rises point to accelerating GDP, while sustained falls tend to precede slowdowns.

Because it is calibrated against GDP and smoothed with a three-month moving average, it responds with a lag to one-off shocks in a single sector or a single month.