Surveying Business Uncertainty

105 Pages Posted: 11 Jun 2019 Last revised: 10 Feb 2020

See all articles by David Altig

David Altig

Federal Reserve Banks - Federal Reserve Bank of Atlanta; Federal Reserve Bank of Cleveland; University of Chicago - Booth School of Business

Jose Maria Barrero

ITAM - Business School

Nicholas Bloom

Stanford University - Department of Economics; National Bureau of Economic Research (NBER)

Steven J. Davis

University of Chicago; National Bureau of Economic Research (NBER); Hoover Institution

Brent Meyer

Federal Reserve Banks - Federal Reserve Bank of Atlanta

Nicholas Parker

Federal Reserve Banks - Federal Reserve Bank of Atlanta

Multiple version iconThere are 4 versions of this paper

Date Written: February 5, 2020

Abstract

We elicit subjective probability distributions from business executives about their own firm outcomes at a one-year look-ahead horizon. In terms of question design, our key innovation is to let survey respondents freely select support points and probabilities in five-point distributions over future sales growth, employment, and investment. In terms of data collection, we develop and field a new monthly panel Survey of Business Uncertainty. The SBU began in 2014 and now covers about 1,750 firms drawn from all 50 states, every major nonfarm industry, and a range of firm sizes. We find three key results. First, firm-level growth expectations are highly predictive of realized growth rates. Second, subjective uncertainty is highly predictive of forecast errors and the magnitude of future forecast revisions. Third, subjective uncertainty rises with the firm’s absolute growth rate in the previous year and the extent of recent news about its growth prospects. We aggregate over firm-level forecast distributions to construct monthly indices of business expectations (first moment) and uncertainty (second moment) for the U.S. private sector.

Keywords: Business Uncertainty, Subjective Forecast Distributions, Surveys

JEL Classification: L2, M2, O32, O33

Suggested Citation

Altig, David and Barrero, Jose Maria and Bloom, Nicholas and Davis, Steven J. and Meyer, Brent H. and Parker, Nicholas, Surveying Business Uncertainty (February 5, 2020). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2019-85. Available at SSRN: https://ssrn.com/abstract=3401842 or http://dx.doi.org/10.2139/ssrn.3401842

David Altig (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Atlanta

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University of Chicago - Booth School of Business

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Jose Maria Barrero

ITAM - Business School ( email )

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Nicholas Bloom

Stanford University - Department of Economics ( email )

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Steven J. Davis

University of Chicago ( email )

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National Bureau of Economic Research (NBER)

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Hoover Institution

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Brent H. Meyer

Federal Reserve Banks - Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
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Nicholas Parker

Federal Reserve Banks - Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

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