The cyclical behavior of the Italian business survey data

This article investigates the cyclical behavior of the degree of plant utilization, inventories, order book level, and confidence climate index data (taken from Italian Business tendency surveys). It first analyzes the co-movements between the survey indicators and the Italian business cycle by performing a sensitivity analysis with respect to the reference business cycle and to the filtering technique, using time and frequency domain methods. It then discusses the ability of such indicators to predict business cycles and their importance with respect to other standard national accounts data. The results of bivariate analysis show that, whereas the degrees of plant utilization, confidence climate and order book level are procyclical, inventories appear to be countercyclical with respect to both the industrial sector and the whole-economy business cycle. Spectral analysis suggests that the high-frequency elements of the survey data tend to lead those of the business-cycle estimates obtained from the national income accounts. The choice of filtering technique affects the results, especially in the magnitude of co-movements. The forecasting exercise reveals the usefulness of such data in forecasting the real economy in the short run.