Today’s Brexit Barometer
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The barometer is powered by four data feeds curated by Bloomberg Intelligence. All except inflation are composed of sub-indexes that are updated in real time. The higher above zero the index is, the better off Britons are economically; the farther below zero, the worse off they are.
Related indicators
Other metrics that measure the well-being of the U.K. economy as Brexit approaches, and how much they’ve changed, compared to a year ago:
Bloomberg British Pound Index
This trade-weighted index tracks the strength or weakness of sterling, compared to a basket of major world currencies. Declines in the level mean less purchasing power for Britons traveling abroad but a boost for British exporters, whose goods are thereby cheaper for foreign buyers.
U.K. Housing Prices
This monthly snapshot from the Nationwide Building Society shows how much residential property prices—already among the most expensive in the world, especially in London—have risen or fallen in the previous year. (Change is expressed in percentage point terms.)
U.K. Govt. Bond Yield
The amount that the U.K. government has to pay to borrow long-term, in the form of 10-year bonds also known as gilts. It shows whether financial markets have faith in Britain’s finances and future stability or whether they see it as a risky bet. (Change is expressed in basis point terms.)
U.K. Unemployment Rate
The number of people actively looking for work but unable to get a job is a key measure of how well an economy is functioning. The unemployment rate—released monthly by the Office for National Statistics—shows how the economy is affecting workers and their families. (Change is expressed in percentage point terms.)
Methodology
The Bloomberg Brexit Barometer tracks economic well-being in the United Kingdom and is updated daily. The weather icon at the top of the page is determined based on how the daily barometer value compares to the history of the index, with each weather icon roughly corresponding to a different category of the historical data:
Thunderstorms
Below –40
Rainy
Below 0
Windy
Below 20
Cloudy
Below 35
Partly cloudy
Below 50
Partly sunny
Below 80
Sunny
80 and above
It is calculated using four series: the U.K. headline inflation rate, plus three proprietary Bloomberg Intelligence-created indicators tracking U.K. economic activity, employment and uncertainty. In all, 22 data sets are used to produce these four indicators. A positive reading indicates economic well-being is above the long-term average—calculated for the period of January 2000 to June 2016—and a negative reading means that it’s below the long-term average.
More specifically, each of the three proprietary indicators is calculated by bringing together the respective underlying series, using a technique known as Principal Components Analysis. All the series are then expressed in the same units—where a value of 0 is equivalent to the long-run average and values above or below 0 represent standard deviations (s.d.) from the mean. The same transformation is made to the CPI inflation series, where a value of 0 represents an inflation rate of 2 percent, which is equal to the Bank of England’s target.
Statistical theory holds that roughly two-thirds of all observations in a normal distribution will lie within one standard deviation of our sample’s zero average (see chart below), while values that are farther out on the fringes of the distribution are more improbable—and therefore more statistically significant.
The barometer score itself is the weighted sum of these four standard deviation values, with activity and employment contributing positively to the index, while inflation and uncertainty contribute negatively.
For instance, assume on a given day inflation (a) is –1.2, economic activity (b) is 0.2, employment (c) is 0.3 and uncertainty (d) is 2.1. The inflation and uncertainty values are multiplied by –0.25, while the activity and employment values are multiplied by 0.25. This results in our new weighted values: inflation 0.30, activity 0.05, employment 0.08 and uncertainty –0.53.
The sum of these four values is then multiplied by 100 to arrive at that day’s Brexit Barometer reading of a rainy –10.0:
The current day’s barometer value is calculated twice, once in the morning (London time) to incorporate the latest available readings for most series contained in the four sub-components, and again in the afternoon to update with any intraday market moves. While some inputs update daily, such as the financial market indicators contained in the uncertainty gauge, the majority are updated monthly. The lags in the data mean that the barometer reading on any given day isn’t a real-time gauge of economic well-being, but rather a reflection of the most up-to-date data portrait available as of that time.
Past values of the barometer are as of 2 p.m. London time on the previous day. Barometer values for each month are then revised to reflect the most recent data 25 days after the end of the month.
Interested in learning more?
Bloomberg subscribers can search for “Brexit Barometer” on the terminal to see the daily data series or search for “Bliss Index” to see the related monthly data series, as well as more information on the underlying Bloomberg Intelligence-created component indicators.