ABSTRACT
In the area of labor, the first cost of living adjustment clause was inaugurated in 1948 in a United Auto Workers-General Motors collective bargaining agreement. Entrepreneurs appear to be aware of the relationship between the change in nominal activity and the underlying inflation rate. The ability of the entrepreneurs to differentiate real from nominal changes does not, however, mean that the surveys help one to forecast real gross national product (GNP). In the case of the European Community surveys, the industrial confidence indicator consists of the arithmetic mean of the net balances relative to a question asking about production expectations in the months ahead, a question concerning orderbooks, and a question on stocks with the sign on the latter inverted. The maximum correlations are reached when the survey net balances lag behind the actual changes in real GNP by one quarter.
