Economic Indicators

Economic indicators or business indicators are markers about an economy. Future performance predictions and economic performances can be analyzed through these indicators.

There are economic summaries, various indices, and earnings reports like housing, unemployment, bankruptcies, Consumer Price Index (a measure for inflation), broadband internet penetration, stock market prices, industrial production, retail sales, and money supply changes in economic indicators.

Economic indicators or business indicators are markers about an economy. Future performance predictions and economic performances can be analyzed through these indicators.

There are economic summaries, various indices, and earnings reports like housing, unemployment, bankruptcies, Consumer Price Index (a measure for inflation), broadband internet penetration, stock market prices, industrial production, retail sales, and money supply changes in economic indicators.

Indicators which change about same time and in same direction with economy are called coincident indicators. These provide information regarding present economic state. Coincident indicators include retail sales, GDP, industrial production, and personal income. A coincident index can be used to identify troughs and peaks in a business cycle.

These indicators are studied in a branch of macroeconomics called “business cycles”. Economic indicators have three major attributes – relation to business cycle or an economy, frequency of data, and timing. In relation to business cycle or economy, indicators have one of three different economic relationships like procyclic, countercyclic, and acyclic.

Procyclic economic indicator moves along same direction as an economy. It means that when economy is well, this number increases. An example is gross domestic product (GDP). Countercyclic economic indicator moves in reverse direction of economy. Unemployment rate increases as economy gets worse. Acyclic economic indicator doesn’t have any relation to an economy’s health. An example would be a sports result which doesn’t have any effect on economy.

In frequency of data, most countries release quarterly GDP figures and monthly unemployment rates. Indicators like Dow Jones Index is immediately available and changes every minute.

In timing, indicators of economy can be leading, lagging, or coincident. It indicates timing of changes of indicators in relation with economic changes. In leading times, indicators change before economy changes. Stock market returns are such indicators that decline before economy declines and improve before economy begins to grow out of recession.

Lagged economic indicator doesn’t change direction till a few quarters after changes in economy. One example is unemployment rate which increases after 2 or 3 quarters following an economic improvement.