An economic indicator is a statistic about economic activity. Economic indicators allow analysis of economic performance and future performance predictions. One application of economic indicators is the study of business cycles. Economic indicators include various indexes, earnings reports, and economic summaries: for example, unemployment rate, stop rate (stop level in US English), housing, consumer price index (size for inflation), consumer leverage ratio, industrial production, bankruptcy, gross domestic, broadband internet penetration, retail sales, stock market prices, and changes in the money supply.
The leading business dating cycle committee in the United States is the National Private Economic Research Bureau. The Bureau of Labor Statistics is the principal fact-finding agent for the US government in the field of labor economy and statistics. Manufacturers of other economic indicators include the US Census Bureau and the United States Bureau of Economic Analysis.
Video Economic indicator
Time-based classification
Economic indicators can be classified into three categories according to their usual time arrangements in relation to the business cycle: key indicators, lagging indicators, and coincident indicators.
Main indicators
The main indicator is an indicator that usually, but not always, changes before the overall economy changes. They are therefore useful as economic short-term predictors. Stock market returns are a key indicator: the stock market typically begins to decline before the overall economy falls and usually begins to improve before the general economy begins to recover from the slump. Other key indicators include consumer expectations index, building permit, and money supply. The Conference Board publishes a combined Leading Economic Index consisting of ten indicators designed to predict activity in the US economy six to nine months in the future.
Component Index Indicator Leading Economic Conference Board
- Average weekly hours (manufacturing) - Adjustment of existing employees' working hours is usually done before new employees or layoffs, which is why average weekly hour sizes are a leading indicator of unemployment changes.
- Average weekly unemployment claims for unemployment insurance - CB reverses the value of this component from positive to negative because a positive reading indicates a job loss. Initial unemployment claims data are more sensitive to business conditions than other unemployment measures, and thus result in monthly unemployment data released by the US Department of Labor.
- Manufacturers new orders for goods/materials - This component is considered a leading indicator because the increase in new orders for consumer goods and materials usually means a positive change in actual production. New orders reduce inventory and contribute to unfilled orders, predecessors for future earnings.
- Vendor performance (delivery diffusion index slower) - This component measures the time it takes to ship orders to industrial companies. Performance vendors are leading the business cycle as increased delivery times can indicate increased demand for manufacturing supplies. The vendor's performance is measured by a monthly survey of the National Association of Purchasing Managers (NAPM). This diffusion index measures half of the respondents who reported no change and all respondents reported slower deliveries.
- Manufacturers new orders for non-defense capital goods - As stated above, new orders lead business cycles because an increase in orders usually means a positive change in actual production and possibly increased demand. This measure is a partner of the new order manufacturer for components of consumer goods/ingredients (# 3).
- Building permissions for new private home units.
- Standard & amp; 500 stock index poor - S & amp; P 500 is considered a leading indicator as stock price changes reflect investors' expectations for the future of the economy and interest rates.
- Money Supply (M2) - The money supply demands checking, travelers' checks, savings accounts, currency, money market accounts and small denominated time deposits. Here, M2 is adjusted for inflation by using a deflator published by the federal government in the GDP report. Bank lending, a factor that contributes to account deposits, usually decreases as inflation rises faster than the money supply, which can make economic expansion more difficult. Thus, an increase in current accounts will indicate expectations that inflation will increase, resulting in a decrease in bank lending and an increase in deposits.
- Interest rate spreads (10-year Treasury vs. Federal Funds target) - The interest rate spread is often referred to as the yield curve and implies the expected direction of short, medium, and long-term interest rates. Changes in the yield curve have been the most accurate predictors of deterioration in the economic cycle. This is especially true when the curve becomes reversed, that is, when long-term returns are expected to be less than a short rate.
- Consumer expectation index - This is the only major indicator component based solely on expectations. This component leads the business cycle because consumer expectations can indicate future consumer spending or tightening. The data for this component comes from the University of Michigan Surveying Research Center, and is released once a month.
Lagging Indicators
Left indicators are indicators that usually change after the economy as a whole. Usually lag is a few quarters a year. The unemployment rate is a lagging indicator: employment tends to increase by two or three quarters after rising in the general economy. In the financial field, Bollinger bands are one of the most commonly used indicators. In a performance measurement system, the profit earned by a business is a lagging indicator because it reflects historical performance; likewise, improving customer satisfaction is the result of initiatives taken in the past.
The Lagging Indicator Index is published monthly by The Conference Board, a non-governmental organization, which determines the index value of the seven components.
The index tends to follow changes in the economy as a whole.
Components in the Conference Board index are:
- The average duration of unemployment (reversed)
- Exceptional commercial and industrial loan value
- Changes to Consumer Price Indexes for services
- Changes in labor costs per unit of output
- Inventory and inventory-to-sale inventory ratio
- Incredible consumer credit to personal income ratio
- The average main rate charged by the bank
Coincident indicators
Coincident indicators change approximately at the same time as the whole economy, thus 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. Coincident indexes can be used to identify, after the facts, peak dates and troughs in the business cycle.
There are four economic statistics comprising the Coincident Economic Index Indicators:
- Number of employees on non-farm payrolls
- Personal income minus transfer payment
- Industrial production
- Manufacturing and sales of trade
The Federal Reserve Philadelphia produces country-level coincident index based on 4 state-level variables:
- Work without salary
- The average working hour in manufacturing
- Unemployment rate
- Wages and salary payments are reduced by the consumer price index (US city average)
Maps Economic indicator
With directions
There are also three terms that describe economic indicators of direction relative to general economic directions:
- Prognicator
- move in the same direction as the general economy: they increase when the economy goes well; Lowered when it did poorly. Gross domestic product (GDP) is a procyclic indicator.
- Countercyclical indicator
- moves in the opposite direction to the general economy. The unemployment and wage-sharing rates are counter-cyclical: in the short run they increase as the economy deteriorates.
- Acoustic indicator
- are those with little or no correlation with business cycles: they may rise or fall when the general economy is doing well, and may go up or down when it does not go well.
Local indicators
Local governments often need to project future tax revenues. The city of San Francisco, for example, uses the price of a one-room apartment on Craiglist, weekend subway numbers, parking garage usage, and monthly reports on passenger landing at city airports.
See also
- Big Mac Index
- The Bureau of Labor Statistics
- CAPRI MODEL
- Consumer Confidence Index
- Consumer Leverage Ratio
- Consumer price index
- Core inflation
- Economic data
- Fundamental analysis
- Original Progress Index
- Gross domestic product
- Hemline Index
- Inflation
- Lipstick Effect
- List of economic reports by US government agencies
- An index of misery (economy)
- Conference Board
References
External links
- OECD Economic Indicator
- Mobile Economic Indicator Application
- US. Bureau of Labor Statistics
- Conference Board - Economic Indicator
- FED101 - Economic Indicators
- International Conference on Survey Indicators and Methodology
- Economic Indicators Monthly analysis from the American Institute for Economic Research (AIER)
- US. Economic Indicator
- United States Economic Indicators (current and historical, open data) - Quandl
- GPO Economic Indicators
Source of the article : Wikipedia
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