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Surveys and business intelligence

the nature of survey information
using survey information - survey balances
business intelligence

In addition to official statistics, the MPC considers a range of surveys provided by business organisations such as the Confederation of British Industry (CBI) and the British Chambers of Commerce (BCC). These surveys can provide additional indications of business trends and conditions.

Surveys can be useful in supplementing the information from official data sources. They often provide an independent check on the current situation and trends. In addition, some survey responses provide forward-looking information. In many cases, survey information is very timely, providing indications of economic conditions before other data are available.

the nature of survey information        

Strictly speaking, most official statistical series are surveys. They are based on samples of firms or individuals, rather than a full population census. But official data are normally based on quantitative information - for example, sales in company A were £100 million in a particular period. 'State of trade' type surveys ask firms for their views rather than numbers and so are qualitative in nature - for example, sales in company B were 'above' or 'below' normal in a particular period, or were 'higher' or 'lower' than in a previous period.

A typical survey will ask companies or individuals a range of questions relating to current economic and business conditions - for example, questions on a firm's output, orders, employment and prices - or about confidence in the future in a more general sense. Responses are often in the form of

surveys can provide an independent check on current trends,
and information about possible future trends

whether something like output or prices is higher or lower than at the time of the previous survey. For example, a firm might be asked 'compared with the situation three months ago, are the prices you charge higher, lower or about the same?' We are interested in how these responses alter over time, ie how the total number of firms responding 'higher', 'lower' or 'same' is changing. For example, if a larger number of firms report that output is now higher than at the time of the previous survey, this might be a sign that the growth in output is increasing.

Some survey responses cover the same ground as the official data - for example, they provide information on output, exports and employment. Others provide additional information that complements official data - for example, on orders, skill shortages and confidence. Survey responses that correspond directly with official data are useful because they are often available sooner than the official data and they can be a helpful cross-check. Survey responses that give additional information may be useful if they provide a guide to something that is either not well measured statistically or is not directly observable - for example, capacity utilisation or skill shortages.

Survey responses may also provide forward-looking information. For example, answers to questions about order books may tell us something about future output, and responses about investment intentions may tell us about future investment spending. Similarly, firms' expectations of prices, employment and output in the near future can be a useful indication of short-term prospects.

using survey information - survey balances        

The way survey information is used depends on its timeliness, track record and coverage. Some surveys cover particular sectors of the economy. The MPC tends to look closely at surveys with a broad coverage - for example, those covering the manufacturing or service sector as a whole. It also looks at surveys covering activity and behaviour in the labour market.

Most surveys do not provide hard data and so the information has to be interpreted in some way. A typical approach is to look at survey responses over time and try to assess the significance of recent changes. It is usual to look at the 'balance' of responses - the difference between the number of firms reporting a rise in, say, output or prices and those reporting a fall. Most of the survey data provided in the Data section is in this format.

we typically look at the difference between the 'up' and
'down' responses to survey questions over time

Large movements in survey balances might warrant closer examination, by comparing the latest observation with, for example, the average over time, or perhaps the same point in previous economic cycles. But it helps to know whether a survey has tended to be a good guide to trends in official data in the past. There is an example of using survey information in the box below.

The CBI Industrial Trends Survey asks manufacturing firms how optimistic they are. The balance of responses from firms saying they are 'more' or 'less' optimistic about the future than previously has tended to have a fairly good relationship in the past with the annual growth of GDP.

In the autumn of 1998, the CBI optimism balance fell sharply. Based on the previous relationship between the CBI series and GDP, the decline could have suggested a sharp fall in GDP growth some time thereafter, perhaps in 1999. However, the CBI survey only covers the manufacturing sector, so an important consideration was the extent to which confidence in the manufacturing sector was likely to be representative of the wider economy at this particular time.

Given the effects on manufacturing firms of sterling's appreciation from 1996 and the impact of the crises in East Asia and other regions in 1997-98, there were reasons to think that the fall in optimism might be more specific to manufacturers, and particularly exporters, than on occasions when optimism fell sharply in the past. In the event, GDP growth slowed in 1999, but did not become negative, ie the level of output across the whole economy did not fall - partly because interest rates were lowered. So although the survey provided useful information, the signals needed to be interpreted carefully.

Simply observing the latest data and the changes and patterns in survey responses can be very useful. At the same time, we have to remember that many surveys are based on smaller and less representative samples than the official statistics. They may not always be an accurate guide to what is happening in the economy or a particular sector. Surveys are not a substitute for official statistics. But used in a complementary way, they can help us to interpret economic conditions and resolve some of the puzzles and uncertainties about the economic outlook.

business intelligence        

It is important for the MPC to understand what lies behind the economic data. In addition to formal economic research, information can be gleaned by talking directly to firms, individuals and experts in particular fields.

Each month the MPC receives information from hundreds of businesses through the reports provided by the Bank's twelve regional Agencies, which are located throughout the United Kingdom. The Agencies speak to companies in all sectors of the economy and cover topics such as demand, employment, investment, and costs and prices. They are able to form an overall view of business conditions in their areas.

Each month the MPC discusses economic conditions with a number of the Bank of England's Agents at the pre-MPC meeting. The Agents also provide information on topics of particular interest to the MPC. This information often adds flavour to the statistics. It might help to distinguish between different interpretations, perhaps when official data are giving unclear or conflicting signals. The aim is to provide the MPC with a better understanding of the circumstances underlying recent trends.

Teams can look at a summary of the information provided by the Agencies in the Agents' Summary of Business Conditions, which is produced in the quarterly Inflation Report and is available on the Bank of England's web site.

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