The best judge of an economy is growth, development and the state of its markets. Policy makers often depend on economic indicators. These indicators are nothing but data released by government and other organizations which tell you the economic health of a nation. You might look to use an app to help you put the whole data together and Fintech LTD is one of the best.
The most important economic indicators are:
- Consumer Price Index
- Consumer activity
- Stock Market.
Employment is the biggest indicator of the economic state of a country. Every month the US Bureau of Labor and Statistics releases the unemployment rate. This rate tells us the number of people who are unemployed vs. those who are employed. This report tells us the state of the labor market. The rate of employment gains more importance during a recession.
US is a consumer driven economy which means only when consumers are happy can there be growth and profits. A bleak economic situation where jobs are limited brings down the selling capacity of the people. This trend leads to a slump in the market because people do not have the purchasing power to buy new homes, cars, electronics and other essentials.
Consumer Price Index
This index is an indicator of the rate of inflation in an economy. It basically measures the capacity to spend by an individual and how expensive it is for a consumer to buy essentials and lead a decent life. It is an indicator of the change in the cost of living of an individual.
Oil is one of the key commodities that affect the market. Increase in oil prices leads to increase in the prices of all essential commodities as a result leading to higher inflation rates.
Consumer activity is directly proportional to consumer confidence where the consumer is confident of spending and saving less. Whenever the consumer confidence is less, the spending stops and this affects the market. This is a good indicator of the future because all stock prices reflect the consumer habits and opinions.
Consumer behavior has its effect on retail sales too; the pattern is that more confidence leads to better retail sales.
Housing reports are another indication of the consumer activity which again stems from consumer confidence. The people of a nation who are confident in the government and its policies will not hesitate to invest in new homes, apply for building permits and so on.
The stock market as an economic indicator is still debated. There are those who believe the stock market because of its forward looking nature reflects the earning potential, profits incurred by business. On the contrary, the detractors believe that the stock market can’t be trusted because the stock prices do not reflect the actual economy. For example the prices increase before an economic recession and decrease when economy is doing well. Whatever the case, you can’t ignore the stock market indicators and their role in the economic situation of a nation.
By analyzing these factors one can determine the direction the economy is heading in.
Do not make the mistake of thinking that once you know the economic indicators the battle is won. No, the actual fight begins now; it is important that you interpret these indicators correctly and determine their role on the market. You must learn to anticipate the reaction of the market to the indicators and interpret the data accordingly.
About Business Cycle Indicators
What is the BCI database?
Subscribe to the BCI database
Some common Questions & Answers
A list of series in the BCI database
Web Links to Sources of BCI data
Business Cycle Indicators Overview in .pdf format
BEA Information on the Transfer of the BCI project to The Conference Board
Letter to Educators