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ECONOMIC INDICATOR An Economic Indicator (or business indicator) is a statistic about the economy.

Economic indicators allow analysis of economic performance and predictions of future performance. One application of economic indicators is the study of business. Economic indicators include various indexes, earnings reports, and economic summaries. Examples: unemployment rate, quits rate, housing starts, Consumer Price Index (a measure for inflation), Consumer Leverage Ratio, industrial production, bankruptcies, Gross Domestic Product, broadband internet penetration, retail sales, stock market prices, money changes.

MACRO ECONOMIC INDICATORS It characterizes the level of economic development and indicates either economic growth or a decline. They are also used for price tendency forecasting purposes. The main macroeconomic indicators are: Consumer Credit The volume of all types of public credit. The volume of consumer credit varies seasonally and achieves significant growth over major holidays (New Year's Day, Christmas). The increase has a positive impact on the country's economy and leads to an increase in the national currency rate. Consumer Price Index (CPI) Indicator showing the change of value of the consumer basket of goods and services. The index was first calculated in the US. It is calculated using average items chosen by residents. The index has a greater impact on the calculation of the cost of living of citizens and is also an inflation indicator. According to the index rising interest rates begin to rise. Core CPI is the Consumer Price Index excluding food and energy. Current Account Balance The ratio of payments from foreign countries and payments abroad. If the incoming funds exceed the outgoing, the balance is active (surplus), otherwise it is passive (shortfall). An active balance has a positive effect on the growth rate of the national currency. Export The value of export goods and services for a specific period of time. Monthly changes of this indicator are generally tracked in percentages and compared with the similar import data. Gold and Foreign Currency Reserves
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Country gold and currency reserves held by the Central Bank or Financial bodies. Large reserves of foreign currency and gold represent the level of security and the benefits of investing in the economy of the country. Gross Domestic Product (GDP) The total cost of all goods and services produced by residents and nonresidents in the country. The first estimates of GDP were made in the USA. Being an indicator of changes in the cost of goods and services within the country for a certain period, the GDP reflects the growth rate of the economy. The GDP is calculated as the sum of consumption volumes, investments, government spending and exports with imports subtracted. GDP growth characterizes the state of the economy, and the growth in comparison with other countries indicates the benefit of capital investment in the economy of this country. Import The cost of the volume of imported goods and services for a specific period of time. Monthly changes in the indicator are generally tracked in percentage and are compared with similar export data. Industrial Production Industrial output of the country and its changes. It is composed of mining and manufacturing industry volumes, the forest and public sectors as well as the production of electricity are also taken into consideration. The indicator reflects the level of the economy, but does not determine the direction of its development. An increase in value of this indicator leads to the growth of the national currency rate. Producer Price Index (PPI) The indicator of the average level of price change for raw materials and finished products, the cost of which also includes the cost of labor. A
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more accurate figure is obtained by exclusion of food and energy industries (PPI excluding food and energy). The index does not take into account the price of imported goods and services. The growth of this indicator leads to the growth of cost inflation: the cost of production increases, while the prices do not change, which leads to an imbalance in production. Retail Changes in retail sales volume, which are determined by consumer demand. In index values the sales of all kinds of goods are taken into account. The most volatile estimate is the sales of automobiles, therefore the most reliable data is calculated without this aspect. The increase in retail sales has an impact on the growth of the national currency rate and on the country's economy as a whole. Trade Balance The ratio of imported and exported goods. The balance is active if the export goods costs exceed the import goods' costs (surplus), otherwise the balance is passive (shortfall). An active balance has a positive effect on the growth rate of the national currency. Unemployment Rate The average number of unemployed citizens over 18 years of age relative to the total labor force. Only persons who are registered as unemployed are taken into account. This indicator first appeared in the 1930s in the United States during the Great Depression. A low unemployment rate indicates a large number of citizens employed in the production of goods and services. An increase in unemployment results in lower GDP: employment in the production of goods is lower, hence, production declines

Three Attributes of Economic Indicators 1. Relation to the Business Cycle / Economy Economic Indicators can have one of three different relationships to the economy:  Procyclic: A procyclic (or procyclical) economic indicator is one that moves in the same direction as the economy. So if the economy is doing well, this number is usually increasing, whereas if we're in a recession this indicator is decreasing. The Gross Domestic Product (GDP) is an example of a procyclic economic indicator.  Countercyclic: A countercyclic (or countercyclical) economic indicator is one that moves in the opposite direction as the economy. The unemployment rate gets larger as the economy gets worse so it is a countercyclic economic indicator.  Acyclic: An acyclic economic indicator is one that has no relation to the health of the economy and is generally of little use. The number of home runs the Montreal Expos hit in a year generally has no relationship to the health of the economy, so we could say it is an acyclic economic indicator 2. Frequency of the Data In most countries GDP figures are released quarterly (every three months) while the unemployment rate is released monthly. Some economic indicators, such as the Dow Jones Index, are available immediately and change every minute. 3.Timing Economic Indicators can be leading, lagging, or coincident which indicates the timing of their changes relative to how the economy as a whole changes.
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LEADING INDICATORS Leading indicators are indicators that usually change before the economy as a whole changes.They are therefore useful as short-term predictors of the economy. Stock market returns are a leading indicator: the stock market usually begins to decline before the economy as a whole declines and usually begins to improve before the general economy begins to recover from a slump. LAGGING INDICATORS Lagging indicators are indicators that usually change after the economy as a whole does. Typically the lag is a few quarters of a year. The unemployment rate is a lagging indicator: employment tends to increase two or three quarters after an upturn in the general economy. In finance, Bollinger bands are one of various lagging indicators in frequent use. In a performance measuring system, profit earned by a business is a lagging indicator as it reflects a historical performance; similarly, improved customer satisfaction is the result of initiatives taken in the past. COINCIDENT INDICATORS Coincident indicators change at approximately the same time as the whole economy, thereby providing information about the current state of the economy. There are many coincident economic indicators, such as Gross Domestic Product, industrial production, personal income and retail sales. A coincident index may be used to identify, after the fact, the dates of peaks and troughs in the business cycle.

TYPES OF ECONOMIC INDICATOR Many different groups collect and publish economic indicators, but the most important American collection of economic indicators is published by The United States Congress. Their Economic Indicators are published monthly and are available for download in PDF and TEXT formats. The indicators fall into seven broad categories: 1. Total Output, Income, and Spending 2. Employment, Unemployment, and Wages 3. Production and Business Activity 4. Prices 5. Money, Credit, and Security Markets 6. Federal Finance 7. International Statistics Each of the statistics in these categories helps create a picture of the performance of the economy and how the economy is likely to do in the future. Total Output, Income, and Spending These tend to be the most broad measures of economic performance and include such statistics as:
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Gross Domestic Product (GDP) [quarterly] Real GDP [quarterly] Implicit Price Deflator for GDP [quarterly] Business Output [quarterly] National Income [quarterly] Consumption Expenditure [quarterly] Corporate Profits[quarterly] Real Gross Private Domestic Investment[quarterly]
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The Gross Domestic Product is used to measure economic activity and thus is both procyclical and a coincident economic indicator. The Implicit Price Deflator is a measure of inflation. Inflation is procyclical as it tends to rise during booms and falls during periods of economic weakness. Measures of inflation are also coincident indicators. Consumption and consumer spending are also procyclical and coincident. Employment, Unemployment, and Wages These statistics cover how strong the labor market is and they include the following: The Unemployment Rate [monthly] y Level of Civilian Employment[monthly] y Average Weekly Hours, Hourly Earnings, and Weekly Earnings[monthly] y Labor Productivity [quarterly] The unemployment rate is a lagged, countercyclical statistic. The level of civilian employment measures how many people are working so it is procyclic. Unlike the unemployment rate it is a coincident economic indicator.
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Production and Business Activity These statistics cover how much businesses are producing and the level of new construction in the economy:
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Industrial Production and Capacity Utilization [monthly] New Construction [monthly] New Private Housing and Vacancy Rates [monthly] Business Sales and Inventories [monthly] Manufacturers' Shipments, Inventories, and Orders [monthly]
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Changes in business inventories is an important leading economic indicator as they indicate changes in consumer demand. New construction including new home construction is another procyclical leading indicator which is watched closely by investors. A slowdown in the housing market during a boom often indicates that a recession is coming, whereas a rise in the new housing market during a recession usually means that there are better times ahead. Prices This category includes both the prices consumers pay as well as the prices businesses pay for raw materials and include: Producer Prices [monthly] y Consumer Prices [monthly] y Prices Received And Paid By Farmers [monthly] These measures are all measures of changes in the price level and thus measure inflation. Inflation is procyclical and a coincident economic indicator.
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Money, Credit, and Security Markets These statistics measure the amount of money in the economy as well as interest rates and include: Money Stock (M1, M2, and M3) [monthly] y Bank Credit at All Commercial Banks [monthly] y Consumer Credit [monthly] y Interest Rates and Bond Yields [weekly and monthly] y Stock Prices and Yields [weekly and monthly] Nominal interest rates are influenced by inflation, so like inflation they tend to be procyclical and a coincident economic indicator. Stock
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market returns are also procyclical but they are a leading indicator of economic performance. Federal Finance These are measures of government spending and government deficits and debts: Federal Receipts (Revenue)[yearly] y Federal Outlays (Expenses) [yearly] y Federal Debt [yearly] Governments generally try to stimulate the economy during recessions and to do so they increase spending without raising taxes. This causes both government spending and government debt to rise during a recession, so they are countercyclical economic indicators. They tend to be coincident to the business cycle.
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International Statistics These are measure of how much the country is exporting and how much they are importing: Industrial Production and Consumer Prices of Major Industrial Countries y U.S. International Trade In Goods and Services y U.S. International Transactions When times are good people tend to spend more money on both domestic and imported goods. The level of exports tends not to change much during the business cycle. So the balance of trade (or net exports) is countercyclical as imports outweigh exports during boom periods. Measures of international trade tend to be coincident economic indicators.
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While we cannot predict the future perfectly, economic indicators help us understand where we are and where we are going. In the upcoming weeks I will be looking at individual economic indicators to show how they interact with the economy and why they move in the direction they do.

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