The Dow Jones Media Economic Sentiment
Indicator (ESI) is a monthly assessment of the
"tone" of content in
15 metropolitan dailies.
(an example of "tone" would be scanning for
the word "recession") The ESI is a
simple barometer based on a scale of zero to
100—the higher the number, the more upbeat
the news and, by extension, the stronger the
economy. Dow Jones back-tested their
media sentiment indicator
to 1990 and found that it could signal
critical turning points in the economy,
sometimes a bit earlier than other economic
measures. Below is the ESI from
January 1990 through March 2009. We
can see that the ESI did a good job of
giving an early predictor for the 2001 and
The ESI team also claims that this indicator
can give an earlier signal to a possible
recession as compared to the Consumer
Confidence Index and the University of
Michigan's Consumer Sentiment indicator.
Per the chart below, it does look like the
ESI did give a signal earlier as compared to
the other sentiment indicators.
And below is the ESI from Aug 2008 through
Aug 2009. We can see that media
sentiment has been gradually climbing,
telling us that the economy is improving.