Business cycle heatmap

The business cycle was rather weak at the end of summer 2025. The heatmap remained blue, which means that the business cycle was in negative territory. The weak phase has lasted for more than two years. The first cautious signs of recovery are in the air: the heatmap displays scattered red dots, and the indicators that have predominantly been blue have now started to fade.

Sources: NAOF’s calculations, Estonian Fiscal Council, Ministry of Economic Affairs and Employment, Statistics Finland, Confederation of Finnish Industries, DG ECFIN, Eurostat (retrieved from Robonomist).

The heatmap illustrates the development of the Finnish economy through cyclical fluctuations. Cyclical fluctuations are monitored with 11 indicators, including indicators reflecting the labour market situation, inflation and confidence.

The colour of the heatmap changes according to the indicator values. Red indicates that, according to the indicator, the economy is growing faster than average. Blue indicates that economic growth is slowing. The more red indicators there are, the more likely it is that the economy is doing well. Accordingly, the higher the number of blue indicators, the more likely it is that the economy is doing poorly.

The heatmap helps to assess how countercyclical the fiscal policy is. In countercyclical fiscal policy, fiscal policy is adjusted to the business cycle. During a downturn, public finances then support economic growth, whereas during an upturn, public finances curb economic overheating and accumulate fiscal buffers for the future. Countercyclical fiscal policy requires up-to-date and reliable information on the business cycle.

Composite indicator on monthly and annual level

A composite indicator has also been created from the individual business cycle indicators of the heatmap to describe the business cycle in the whole economy. The composite indicator can be examined on monthly and annual level. You can select the period shown.

In the monthly composite indicator, cyclical fluctuations appear rather sharp, whereas in the annual indicator, they appear more moderate. In other words, the monthly composite indicator describes the business cycle much more sensitively than the annual indicator.

The value of the composite indicator is based on the heatmap indicators. Half of the weighting is based on survey and sentiment indicators and the other half on real economy indicators.  The exact weightings are shown in the table below.

Indicator table

Composite indicator and output gap estimate

One of the main advantages of the heatmap and its composite indicator is that they illustrate the business cycle directly. In addition, the heatmap is based only on statistical data that are revised very little afterwards.

Indirect methods, such as the output gap, are also used to describe the business cycle. The output gap is the difference between potential output and actual output, or GDP. The EU Commission, the Member States and international organisations, such as the International Monetary Fund (IMF), calculate the output gap estimate using the production function method. The weakness of the method is that the output gap estimate may be revised substantially afterwards. This was the case, for example, in 2021 and 2022.

The composite indicator and output gap estimate often develop in the same direction, but there are also differences.

Background to the heatmap

The idea of the heatmap is based on the quarterly economic heatmap originally developed by the Estonian Fiscal Council (Eelarvenõukogu). In addition to economic confidence indicators, the Finnish heatmap utilises the monthly statistics on economic trends of Statistics Finland, the Ministry of Economic Affairs and Employment, and the Confederation of Finnish Industries.