The BBKI is a barometer of where the economy is and where it might be heading in the future.

June 30, 2025 (May data)

As we close out the second quarter of 2025, there continues to be a lot of mixed signals being sent about the current state and trajectory of the economy. Additionally, the fiscal and monetary policy landscape has continued to add its own elements of uncertainty in projecting the future. Turning to the latest economic data, an increasing amount points to a slowdown in consumption and consumer sentiment. With that said, the labor market has continued to add jobs, and the unemployment rate continues to be at a historically low level. It’s an open question, however, if these trends will continue and what sort of unanticipated economic shock might be right around the corner. Needless to say, there still remains an immense amount of interest on the economy and where it might be headed.

Looking under the hood with the BBKI

The latest release of the Brave-Butters-Kelley Indexes (BBKI) has the coincident indicator at -0.7 for May, an uptick from our estimate for April of -1.0. This reading suggests the economy is below trend, which our model estimates to be near 2.7%. The increase in the read for May in part reflects increases in the growth of average hourly earnings, a steady unemployment rate, and an increase in manufacturing industrial production that occurred in May.  

Pulling this all together, as we close out the first half 2025 the U.S. economy appears like it could be at an inflection point. Whether the contraction we observed in GDP last quarter proves to be a blip or a harbinger for a more prolonged slowdown in economic activity this year is likely going to hinge on how recent trends in consumption and the labor market continue or reverse course. Paying close attention to the next batch of incoming data will be vital in gauging how consumers and businesses have responded to the heavy dose of uncertainty that opened 2025.

• Analysis
• BBKI Key Data
• BBKI Series Contributions    

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An additional look at quarterly GDP

What is the BBKI?

Business cycle indexes and monthly GDP growth

Because the most comprehensive measures of economic activity, such as gross domestic product (GDP), have a substantial time lag before they are published, policymakers and businessses require more timely and accurate assessments of overall economic activity in order to make better decisions. This led a group of economists from the Federal Reserve Bank of Chicago and the IU Kelley School of Business to create a set of indexes — the BBKI — that can accurately identify key turning points in economic activity earlier.

The BBKI inputs an unbalanced panel of 490 monthly measures of real economic activity plus quarterly real GDP growth extending back to January 1960. (These data broadly reflect the set of real economic activity indicators commonly used to forecast U.S. GDP growth.) The outputs include a coincident index, a leading index, and not only a measure of monthly GDP growth, but also a decomposition of it into its trend, cycle and irregular components.

The coincident index

The coincident index addresses the question: "Where are we?"

It is measured in standard deviation units and assesses the current strength of the economy. Using a threshold value of -1.0, provides a remarkably accurate (up to 99% accurate) way to gauge whether the economy is in a recession. This accuracy in gauging the strength of the economy has been shown to best many of the leading alternatives and can often come in a much timelier fashion given that the BBKI is released monthly.

The leading index

The leading index addresses the question: Where are we going?

It is a sub-component of the coincident index that isolates the economic activity that has historically been a leading signal of the trajectory of economic activity going forward. This leading index has on several occasions projected a future business cycle turning point several months before a peak or trough actually occurs — historically being the most informative about six to seven months out.

Monthly GDP growth

Each month, real GDP growth is allowed to have three separate components — each with their own separate type of dynamics — that all must add up to yield the total amount of growth or contraction.

• Trend: This represents the very low-frequency and slow-moving component of real GDP growth. One can interpret it as the very long-run average of real GDP growth. While the trend component does not vary that much month to month, over the last several decades we have seen a noticeable decline in the long-run average of real GDP growth.

• Cycle: This is the component of real GDP growth that reflects the business cycle. It is designed to capture systematic expansions or contractions across a variety of sectors of the economy. It is the cycle component that in many instances will be the most influential in guiding assessments about the health of the economy and public policy decisions designed to address it.

• Irregular: This component is what remains “left over,” after accounting for the trend and cycle components, to get back to the amount of growth or contraction we observed. While the BBKI methodology is designed to have the trend and cycle components reflect movements that are likely to govern the direction of growth going forward, the irregular component is designed to reflect more “one-off” or random fluctuations that are less likely to reflect where economic activity is headed in the future.

The BBKI approach identifies each of these components by breaking down the quarterly time series of real GDP and how it relates to the large set of other economic activity indicators. By leveraging the monthly indicators, it is able to construct these measures (and the aggregate) at a monthly frequency. This means the BBKI is able to provide a more detailed estimate more frequently than is reported by the U.S. Bureau of Economic Analysis.

Read more about the BBKI

• Tracking the economy with the Brave-Butters-Kelley Indexes (Indiana Business Review, Fall 2022)
• A New Big Data Index of U.S. Economic Activity (Economic Perspectives, 2019) 
• A ‘Big Data’ View of the U.S. Economy: Introducing the Brave-Butters-Kelley Indexes (Chicago Fed Letter, 2019)
• Federal Reserve Bank of Chicago BBKI archives

Release schedule

The table below shows upcoming releases along with the data used in each release.