What is the Business Starts Index?

Typically, a Business Starts Index indicates growth or decline or economic trends peculiar to an economy at a particular period of time. Current financial patterns of an economy are evaluated by economists and lawmakers using the business starts index. However, this concept also refers to a scale that indicates the number of businesses that start at a specific time. This business starts index captures the incorporated companies as well as unincorporated companies that have not been granted formal corporate status. Based on filings of companies and businesses, the business starts index reflects the number of businesses that start operations at a particular time.

Back to: ECONOMIC ANALYSIS & MONETARY POLICY

Why is the Business Starts Index Important?

The business starts index can be used to compare growth and decline between two or more states at a particular period of time. This index contains reports on businesses that start operations at a particular time as well as those that stop or close operations. This index is one of the economic indicators used in many states and countries to evaluate growth or decline in the economy. Usually, states give monthly reports of business starts index, the statistics provided are helpful in detecting the productivity level of a state or country. The U.S. Census Bureau launched the Business Formation Statistics (BFS) in 2018, this is an economic tool developed to cater for the inaccuracy of the business starts index. This tool pays attention to Employer Identification Number (EIN) applications, which are germane to business startups.

Business Starts Index and Economic Forecasting

There is an interaction between business starts index and economic forecasting in any given nation or state. The reason for this is simple, business growth are important indicators of economic growth. Also, entrepreneurship is vital to every economy. Therefore the number of businesses starting in a country reflect the trends or cycle of the nations economy. The statistics of businesses in a country can be used to gauge the health and status of the economy. This is why many countries place importance on collecting data of businesses through their filings with the Bureau of Labor and Statistics (BLS) and government agencies in different countries. The strength and weakness of the market indicates the wellness of the economy.

Business Starts Index at the State Level

States give monthly reports of business starts index, indicating the number of businesses that are filed or enrolled in the state. It is part of the duties of state agencies to track businesses, license them and assign them after meeting necessary requirements. Different departments in different states perform this function, this is an important indicator of how well a state is doing economically. The number of businesses that start and stop in a month, a quarter or a year are accurately captured at the state level.