Which Economic Indicators Best Predict Presidential Elections?

Nate Silver answers Which Economic Indicators Best Predict Presidential Elections?. He looked at 43 economic indexes all back to 1948.

"The broader point — and one thing this evidence is fairly definitive upon — is that the rate of change is what counts. Americans will give a fair amount of credit to a president in an economy that is still below its full productive capacity provided that it seems to be getting better. This can also be seen in the poor performance of the variable actual-to-potential G.D.P. (which tracks output against its long-term trend-line) as compared to the comparatively strong performance of the rate of G.D.P. growth during the election year."

"Meanwhile, the best-performing variable has been the ISM manufacturing index, which is a measure of how much manufacturing businesses are ramping up or ramping down their activity. It has had an r-squared of .46."

"So does this mean you should all go out and use the ISM manufacturing index in your forecasting models? Actually, maybe not. It is certainly worth looking at. But when you’re testing 43 different economic indicators over a sample of just 16 elections, the best-performing ones are likely to have been a little lucky. In fact, the relative rank of the economic indicators has historically been very inconsistent: those that perform best over one set of elections do not do much better over the long-term. "