Diffusion Index Calculator

What is a Diffusion Index?

A diffusion index measures breadth — the percentage of components in a composite economic index that are moving in the same direction. It answers the question: "How widespread is this move?"

Rather than looking at the magnitude of changes, diffusion indexes focus on the direction of changes across multiple indicators. This helps distinguish between moves driven by one or two large components versus broad-based participation across the economy.

How It Works

The Conference Board's diffusion index assigns a score to each component:

• 1.0 — component is improving (rising above a small threshold)
• 0.5 — component is essentially unchanged (flat)
• 0.0 — component is deteriorating (falling)

The diffusion index equals the sum of scores divided by the number of components, multiplied by 100. This produces a value between 0% and 100%.

Net Breadth

Net breadth is a simpler measure that counts the difference between improving and deteriorating indicators as a percentage of total:

Positive net breadth means more indicators are improving; negative means more are deteriorating.

Important Considerations

• Inverted series: Some indicators (like initial unemployment claims) are inverted — falling values indicate improvement. These must be classified by economic direction, not raw direction.
• Equal weighting: Each indicator counts equally regardless of economic significance.
• Breadth vs. magnitude: A high diffusion index means widespread improvement, but says nothing about the size of those improvements.
• Not a forecast: Diffusion indexes measure current breadth, not future direction.