Nobody can accurately predict the economy’s future performance – at least not consistently. But that doesn’t stop economists from trying. In one of their attempts, economists working for the Federal Reserve Bank of Chicago transformed 490 measures of economic activity into an index meant to predict future monthly GDP growth. They called it the Brave-Butters-Kelly Index and it appears in the accompanying graph.

If the index worked perfectly, the economy would enter a recession about eight months after the value listed on the y-axis dropped below -1. As you can see, for the four recessions depicted in the graph with shaded areas, the index correctly predicted only the first and last of these recessions. So, the index has a mere 50 percent success rate.

Joe McGarrity is a Professor of Economics at UCA. He can be reached at

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