Concerns Over Future Growth Drag Down Dow Jones Economic Sentiment Indicator

ESI Falls to 43.2 as news coverage focuses on negatives of rising gas prices, local government budgets

Mar 31, 2011, 13:15 ET from Dow Jones & Company

NEW YORK, March 31, 2011 /PRNewswire/ -- Weighted down by concerns about future consumer spending, the Dow Jones Economic Sentiment Indicator dropped 3.3 points to 43.2 in March. This is indicator's lowest point since September 2010 and its sharpest drop since the autumn of 2008 when the global financial markets were collapsing.

"On its own the decline needn't be that alarming. It's not far off from the average monthly change in the index, which is to say it's not unusual," said Dow Jones Newswires "Money Talks" columnist Alen Mattich. "But it will be worth keeping an especially close eye on what happens to the index over the coming months."

Mattich added: "The biggest worry could be future payrolls, because the ESI tracks U.S. employment closely. If the index continues to decline, the downtrend could suggest slower payroll gains ahead."

The ESI is determined by in-depth sentiment analysis of national news coverage across 15 daily newspapers. 

In March, reports on the U.S. economy focused on the negatives of higher gasoline prices and falling home prices, which both cut into household wealth and raised concerns about consumer spending. Coverage of issues around state and local government budgets also dragged down the indicator.

Mitigating the ESI's fall and offering some positive signs for future growth was media coverage of increased dividend payouts and some firming in commercial real estate.

The Dow Jones Economic Sentiment Indicator aims to predict the health of the U.S. economy by analyzing the coverage of 15 major daily newspapers in the U.S. Using a proprietary algorithm and derived data technology, the ESI examines every article in each of the newspapers for positive and negative sentiment about the economy. The indicator is calculated through Dow Jones Insight, a media tracking and analysis tool. The technology used for the ESI also powers Dow Jones Lexicon, a proprietary dictionary that allows traders and analysts to determine sentiment, frequency and other relevant complex patterns within news to develop predictive trading strategies.

The ESI's back-testing to 1990 shows that the ESI clearly highlighted the risk that the U.S. economy was sliding into recession in 2001 and 2008 and suggests the indicator can help predict economic turning points as much as seven months in advance of other indicators. For more information, visit http://dowjones.com/esi.

About Dow Jones Insight

Dow Jones Insight  (http://www.dowjones.com/product-djinsight.asp) uses innovative text mining and analytic technologies to help organizations keep informed about relevant issues, news, conversations and trends emerging in mainstream, Web and social media.  Dow Jones Insight's global content collection includes more than 25,000 news and information sources as well as blogs, message boards, and posts from YouTube and Twitter.  

About Dow Jones

Dow Jones & Company is a global provider of news and business information and a developer of technology to deliver content to consumers and organizations across multiple platforms. Dow Jones produces newspapers, newswires, Web sites, apps, newsletters, magazines, proprietary databases, conferences, radio and video.  Its premier brands include The Wall Street Journal, Dow Jones Newswires, Factiva, Barron's, MarketWatch, SmartMoney and All Things D. Its information services combine technology with news and data to support business decision making. The company pioneered the first successful paid online news site and its industry leading innovation enables it to serve customers wherever they may be, via the Web, mobile devices and tablets. The Dow Jones Local Media Group publishes community newspapers, Web sites and other products in six U.S. states. Dow Jones & Company (www.dowjones.com) is a News Corporation company (NASDAQ: NWS, NWSA; ASX: NWS, NWSLV; www.newscorp.com).

The Dow Jones Economic Sentiment Indicator is provided for analysis purposes only and Dow Jones makes no representation that the indicator is a definitive predictor of sentiment or the health of the U.S. economy.  This report does not in any way reflect an opinion of Dow Jones regarding the U.S. economy or the suitability of any investments.

SOURCE Dow Jones & Company



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