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Data extracted: May 2026

Planned article update: 12 August 2026

Highlights

Business Cycle Clock indicators show an ongoing slowdown phase for the euro area in Q1 2026

Business Cycle Clock
Source: Eurostat (BCC)

This article presents the Eurostat Business Cycle Clock (BCC), a tool showing different economic cycle phases for the euro area using a clock-type graph. The clock is designed to represent the empirically observed sequence of turning points of the business, growth and acceleration cycles. Its indications are based on 3 synthetic indicators: the growth cycle coincident indicator (GCCI), the business cycle coincident indicator (BCCI) and the acceleration cycle coincident indicator (ACCI), which are all experimental in nature (see Context for more methodological information).

Business Cycle Clock's indications for the euro area

According to the latest Business Cycle Clock indications, the euro area economy, after a long period of accelerating growth which started in 2023, moved back into a slowdown phase with decelerating, although positive, growth.

During Q1 2026 the euro area economy has been characterised by a persistent slowdown phase. The ongoing negative evolution of the euro area economy is influenced by the deterioration of the geopolitical context and tensions on the oil and gas markets which increase the risk of a new surge in inflation. Given these circumstances, it is important to closely monitor economic developments in the coming months even though no signals of recession have been detected.

Based on the results of the dating exercise available up to Q4 2025, the euro area economy remains in a slowdown phase with accelerating growth. It is important to note that these results do not yet reflect the impact of the geopolitical tensions arising in Q1 2026. This can at least partially explain the discrepancies between the results of the dating and detecting exercise.

Figure 1: Business Cycle Clock's indications for the euro area
Source: Eurostat (BCC)

The BCC tool signal shown in Figure 1 is based on 3 coincident cyclical indicators: the growth cycle coincident indicator (GCCI), the business cycle coincident indicator (BCCI) and the acceleration cycle coincident indicator (ACCI). They are estimated in the detecting exercise (see Context for more methodological information).

Growth cycle coincident indicator

In Q1 2026, the growth cycle coincident indicator (GCCI) remained stable at one, indicating a persistent slowdown phase.

Figure 2

Business cycle coincident indicator

The business cycle coincident indicator (BCCI) remained steady at zero in Q1 2026, indicating the absence of recessionary signals.

Figure 3

Acceleration cycle coincident indicator

In Q1 2026, the acceleration cycle coincident indicator (ACCI) was slightly increasing from 0.76 in January to 0.88 in March 2026, confirming an ongoing phase of decelerating growth.

Figure 4

Source data for tables and graphs

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Data sources

The GCCI and BCCI are estimated using the following input variables:

• industrial production index (IPI),
• unemployment rate,
• manufacturing employment expectations for the months ahead,
• financial situation of consumers over the last 12 months.

The last 2 variables are from the Business and consumer surveys (BCS) conducted by the European Commission's Directorate-General for Economic and Financial Affairs. The ACCI is estimated using the Economic Sentiment Indicator, a synthetic indicator from the BCS.

Context

The main purpose of the Business Cycle Clock (BCC) is to complement the information contained in the euro indicators dashboard by extracting signals on the state of the economy.

Economic activity naturally moves through cycles of expansion and contraction. Knowing which phase the economy is currently in- and detecting early signs of a shift or an upcoming turning point - is a key focus for econometric research. The BCC tool is able to represent cyclical developments in the euro area economy through visuals that are both attractive and easy to interpret.

The clock is structured according to the αABβCD approach, which is based on an empirically observed sequence of turning points of the acceleration, business and growth cycles. By following this sequence, the clock helps users clearly see where the economy stands and how it is changing over time (see Figure 5).

Figure 5: Acceleration, business and growth cycles

The business cycle is meant to reproduce the cycle of macroeconomic activity . The turning points of this cycle, named B for peaks and C for troughs, mark the switch from recessions (negative growth) to periods of expansions ( positive growth).

The growth cycle is defined as the deviation of the reference series (GDP for example) to the trend. The growth cycle has turning points named A for peaks and D for troughs. Peak A is reached when the growth rate decreases below the trend growth rate. Symmetrically, trough D is reached when the growth rate overpasses it again.

The acceleration cycle, also called the growth rate cycle, relates to increases and decreases in the growth rate of the economic activity. The peak, turning point α, represents a local maximum of the growth rate. By contrast, the trough (turning point β) indicates a local minimum of the growth rate. The acceleration cycle is characterised by the highest number of fluctuations and a high degree of volatility.

The BCC tool is based on 2 complementary exercises: the dating system with the results shown in the line chart in the lower part of the tool and the detecting system with the results appearing in the clocks in the upper part of the tool (see Figure 6).

Figure 6: Business Cycle Clock – upper and lower parts

The detecting exercise is based on a purely parametric approach using the Markov switching models as the main modelling methodology. Three coincident cycle indicators are estimated:

• the business cycle coincident indicator (BCCI): shows the probability of recession and identifies the turning points (peaks and troughs) in the business cycle
• the growth cycle coincident indicator (GCCI): signals the likelihood of a slowdown and signals the peaks and troughs of the growth cycle (when economic growth is above or below its trend)
• the acceleration cycle coincident indicator (ACCI): indicates the probability of a deceleration in the growth rate and signals the peaks and troughs of the growth rate cycle (marking when growth starts to speed up or slow down).

A multivariate Markov switching model is used to simultaneously estimate turning points for the growth and the business cycles. Turning points of the acceleration cycle are estimated independently by using a multivariate Markov switching model. These estimations are carried out on a monthly basis. The indicators are calculated for the euro area as a whole, as well as for individual Member States. The location of the hand in the BCC tool is based on the values of the 3 cyclical coincident indicators for the acceleration, business and growth cycles, and in particular on their positioning with respect to the 0.5 threshold (see Table 1).

Table 1: How the clock hand position is computed

The clock has 6 sectors (see Figure 7), which can be interpreted as follows:

• In the upper and lower right quadrants of the clock, sectors 1, 2 and 3 indicate a decrease in the growth rate. In the first quadrant, the growth rate is still above the trend growth rate. At point A, the growth rate slips below the trend growth rate. In the second quadrant, the growth rate is below the trend growth rate. At point B, it becomes negative and at point β, the growth rate reaches a minimum.
• In the lower and upper left quadrants of the clock, sectors 4, 5 and 6 indicate an increase in the growth rate. In the third quadrant, the growth rate is still below the trend. At point C, it becomes positive and at point D, it overpasses the trend growth rate.

The names of the sectors are included in Figure 7.

Figure 7: Cyclical phases indicated by the Business Cycle Clock in quadrants and sectors

The dating exercise is designed to identify past turning points simultaneously in the acceleration, business and growth cycles having the αABβCD framework as reference. The turning points are identified by means of a non-parametric dating rule very similar to the one proposed by Harding and Pagan (2002).

This framework allows for a structured chronology of cyclical phases:

α: Start of deceleration

A: Peak of growth

B: Peak of business cycle

β: Trough of acceleration

C: Trough of business cycle

D: End of slowdown phase

The main reference series for the dating exercise is the quarterly GDP in volume, complemented by the industrial production index (IPI). The dating exercise is conducted quarterly, with the most recent 3 years of identified turning points considered provisional and subject to revision as new data becomes available.

The BCC and the cycle coincident indicators are presented in more detail in several chapters of the Handbook on Cyclical Composite Indicators and Eurostat's Business Cycle Clock – A user's guide (see also Billio, Ferrara, Mazzi, Moauro (2016), Billio, Ferrara, Mazzi, Ruggeri-Cannata (2016), and Mazzi (2015)). An overview of the methodology is also available in The Eurostat Business Cycle Clock: a complete overview of the tool (Ruggeri-Cannata (2021)). Information on how the tool has been performing during the pandemic can be found in The Eurostat business cycle clock and the pandemic: Some considerations (Ruggeri-Cannata, Ronkowski (2022)).

Explore further

Other articles

• Industrial production statistics
• Unemployment statistics

Visualisation

• Business Cycle Clock

External links

• Business cycle tracer