Surveying Business Uncertainty

David Altig, Jose Maria Barrero, Nicholas Bloom, Steven J. Davis, Brent Meyer, and Nicholas Parker
Working Paper 2019-13
June 2019 (Revised July 2019)

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We develop a new monthly panel survey of business executives and a new question design that elicits subjective probability distributions over own-firm outcomes at a one-year lookahead horizon. Our Survey of Business Uncertainty (SBU) began in 2014 and now covers 1,500 firms drawn from all 50 states, every major industry in the nonfarm private sector, and a full range of firm sizes. We use SBU data to measure expected future outcomes for the growth of sales, employment, and investment for each firm and the uncertainty surrounding those expectations. Mean expectations are highly predictive of realized growth rates in the firm-level data, and subjective uncertainty is highly predictive of absolute forecast errors. We also use the SBU data to produce a Business Expectations Index (first moment) and a Business Uncertainty Index (second moment) for the U.S. economy. In Granger causality tests, the Business Expectations Index has statistically significant predictive power for a range of prominent business cycle indicators. The SBU also includes special questions that elicit additional information, including the perceived effects of specific government policy developments on the firm's decisions and outcomes.

JEL classification: L2, M2, O32, O33

Key words: business uncertainty, subjective forecast distributions, surveys link

The authors are indebted to Mike Bryan, who played an instrumental role in launching the Survey of Business Uncertainty, and to our survey team: Grayson McAlister, Mea Resea Homer, Angelica Martini, Andres Carrillo-Rodriguez, Diana Basnakian, J. Alex Fields, Isabella Webber, Ethan Nadeau, Albert Hunecke, Mehak Ahmed, Paris Stroud, Luke Owens, Alexander Rangazas, J. Breuer, Nicholas Kogan, Daniel Brown, Brianna Goodrum, and Emilio Rodriguez. They thank Tatsuro Senga for input about related Japanese surveys and the Federal Reserve Bank of Atlanta and the Alfred P. Sloan Foundation for generous financial support. The views expressed here are those of the authors and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the authors' responsibility. All results have been reviewed to ensure that no confidential information was disclosed.

Please address questions regarding content to David Altig, Federal Reserve Bank of Atlanta; Jose Maria Barrero, Stanford University; Jose Maria Barrero; Nicholas Bloom, Stanford University; Steven J. Davis, University of Chicago Booth School of Business and Hoover Institution; Brent Meyer, Federal Reserve Bank of Atlanta; or Nicholas Parker, Federal Reserve Bank of Atlanta.

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