The CFSEC asks contacts in the Seventh Federal Reserve District to rate various aspects of economic conditions along a seven-point scale. A series of diffusion indexes is calculated from these responses.

The CFSEC diffusion indexes are derived from survey questions on organizations’ product demand, hiring, capital spending, input costs, and outlook for the U.S. economy. Respondents report how these aspects of their operations have changed over the past month (or are expected to change in the next 12 months) on a seven-point scale. Each diffusion index is calculated as the difference between the number of respondents with answers above their respective average responses and the number of respondents with answers below their respective average responses, divided by the total number of respondents. The index is then multiplied by 100 so that it ranges from +100 to −100. Respondents with no prior history of responses are excluded from the calculation. As an example, for the CFSEC Activity Index, if 30 respondents report above-average product demand growth, 20 respondents report below-average demand growth and there are 100 total respondents, the index will have a value of +10. On average, there are about 120 survey respondents, representing organizations from a wide range of industries with operations in the Seventh District.

For a detailed description of the diffusion indexes and their properties, see this Economic Perspectives article.