September 29, 2025 (August data)
As we close out September, the economy continues to exhibit patterns of one navigating choppy waters — with much of the incoming data showing mixed signals. While job growth persists, the pace has slowed, and signs of labor market cooling are becoming more apparent, particularly in wage growth and job openings. Inflation remains sticky: headline CPI is at 2.9% year-over-year in August, and core PCE inflation continues to hover above the Fed’s 2% target, reinforcing concerns about the durability of price pressures. Yet, consumer spending has remained surprisingly resilient, buoyed by strong balance sheets among households. In this environment, the Brave-Butters-Kelley Indexes (BBKI) offer a timely and forward-looking gauge of economic activity — helping us better understand where the economy stands and where it may be headed next.
Looking under the hood with the BBKI
The latest release of the Brave-Butters-Kelley Indexes (BBKI) has the coincident indicator at -0.4 for August, a slight downtick from our estimate for July of -0.3. This reading suggests the economy is below trend, which our model estimates to be near 2.8%. The slight downtick in the read for August in part reflects a modest decrease in housing starts, in growth in total payroll employment, and an increase in the unemployment rate in August.
Pulling this all together, the economy appears to be taking in water but still staying afloat. Much of its resilience to date has been anchored by a consumer buoyed by a labor market that, while softening, remains historically strong. Should labor market conditions deteriorate further or consumer sentiment weaken meaningfully, it would not be unreasonable to expect more pronounced economic softness as we head into the final quarter of 2025.
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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.
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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.
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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
Release schedule
BBKI Releases Postponed
Updates of the Brave-Butters-Kelley Indexes (BBKI) are delayed (beginning with the November 3 release) because underlying data from government agencies is unavailable due to the federal government shutdown. We will announce new BBKI publication dates after the government reopens.
The table below shows upcoming releases along with the data used in each release.
| Date of Release |
Monthly Data |
| November 3, 2025 |
September 2025 |
| December 1, 2025 |
October 2025 |
| December 22, 2025 |
November 2025 |
