Forecasting OECD industrial turning points using unobserved components models with business survey data

The approach followed in this paper stresses the importance of timing in signalling turning points. This is done in two stages; first a signal that a turning point is likely to occur, and later a statement of when it will occur. We use Young's trend derivative method, adding leading qualitative survey data. We find high coherence between its low frequency component and that of the corresponding economic variable. We study industrial production in six OECD countries with special emphasis on France and Spain. Inclusion of survey data improves forecast accuracy.