Quantification of qualitative firm-level survey data

Survey data are widely used to provide indicators of economic activity ahead of the publication of official data. This paper proposes an indicator based on a theoretically consistent procedure for quantifying firm‐level survey responses that are ordered and categorical. Firms' survey responses are assumed to be triggered by a latent continuous random variable as it crosses thresholds. Breaking tradition these thresholds are not assumed time invariant. An application to firm‐level survey data from the Confederation of British Industry shows that the proposed indicator of manufacturing output growth outperforms traditional indicators that assume time‐invariant thresholds