Economy and Confidence
22cool
Now 99.24 | Data for Aug 2026
Hot and cold describe position, not good or bad: warm does not mean a fall is coming, and an extreme reading does not mean a quick reversal. We describe history only, with no buy or sell advice.
What it is
OECD measures of business and consumer confidence; 100 is the long-term norm. The headline reading is G20 business confidence.
Confidence moves first and behavior follows: how businesses and consumers see the future often turns before their actual spending does.
Public substituteWe use this in place of “Purchasing managers’ indices (ISM, S&P Global)”. PMIs use 50 as the line between better and worse and cover many countries; the Philadelphia Fed survey uses 0 as the line and covers only manufacturers in its district (eastern Pennsylvania, southern New Jersey and Delaware); OECD business confidence combines official business surveys from many countries. All three tend to point the same way, but their scope and numbers differ. They measure similar things, but they are not the same number.
Public substituteWe use this in place of “University of Michigan consumer sentiment”. The University of Michigan index is the score of a single US survey; OECD consumer confidence converts consumer surveys from many countries onto one common scale (long-term average = 100). They tend to point the same way, but the numbers differ. They measure similar things, but they are not the same number.
The headline reading is G20 business confidence; 100 = long-term norm.
Where it stands now
coldcoolneutralwarmhotHatched = earlier periods that were also cool
| Components | Percentile | Level | Data month |
|---|---|---|---|
| Japanese business confidence | 92 | hotat an extreme | Sep 2026 |
| US business confidence | 57 | neutral | Sep 2026 |
| German business confidence | 45 | neutral | Sep 2026 |
| Chinese business confidence | 18 | cold | Aug 2026 |
| Consumer confidence (G20) | 4 | coldat an extreme | Aug 2026 |
When it was here before
US stocks after it began, cumulative1 yr2 yr3 yr
For each period, the changes 1, 2 and 3 years after it began are cumulative and measured from its first month; “What happened next” is measured from every cool month, so the two give different numbers. The events named beside each period are major events of that time, not necessarily related to the readings here.
What happened next
Bars: median cumulative changeEarlier months with Confidence cool, excluding the current period (111)All months (490)
Median of the deepest drop below the starting month within the next 5 years: −0.7% for months with Confidence cool; −3.7% for all months.
The cool months come from a small number of market episodes (13), and neighboring months are not independent events; rises and falls are all listed. This is the historical record, not a forecast. “US stocks” means the S&P 500 price index compiled by Professor Shiller (monthly average, excluding dividends).
| Median position | Back to neutral (40–60) | Still no warmer than cool | |
|---|---|---|---|
| 1 yr later | 41neutral | 18% | 49% |
| 3 yr later | 34cool | 10% | 54% |
| 5 yr later | 63warm | 9% | 38% |
Has hot or cold lined up with later returns?
1985–2021: average yearly change in US stocks over the next 5 years
In this period, the hotter the month, the lower the average over the next 5 years. The months overlap, so there are really only a few market episodes. This is a tendency, not a rule, and not a forecast.
What it is linked to
ConfidencetoLeading indexCommon explanation: Knock-on · same direction
Business and consumer confidence surveys pick up turning points in the economy early, moving with the leading index
This issue: Confidence at 22 (cool), Leading index at 42 (neutral) — at least one is in the neutral range (40–60), so we make no call this issue.
Supported by the dataAgreement +0.77 · in step in 36 of 36 5-year periods
Values
Data and sources