Economic Indicators (11.3-11.3.6.3)

Employment Indicators

1) Average weekly initial claims for unemployment compensation 2) Average workweek in manufacturing Both measures predict the direction of economic activity in the country.

The Conference Board

A non-governmental, not-for-profit research organization

Trade Deficit

An excess of imports over exports. reported as part of the balance of payments figures. - Over time this can lead to the devaluation of a country's currency - country will be converting, or selling its currency to obtain foreign currency to pay for its increasing imports.

Trade Surplus

An excess of one country's export over its imports and is reported as part of the balance of payments figures. - over time can lead to the strengthening of a country's currency.

Gross Domestic Product (GDP)

Express the total value of all final goods and services produced within the United States during the year. Includes: 1) Personal Consumption - largest component 2) Government Spending 3) Gross Private Investment 4) Foreign Investment 5) Total Value of Net Exports - Exports minus Imports Based on a constant dollar to account for inflation. Measures a country's output produced within its borders regardless of who generated it.

Core CPI

Index for all items, less food and energy. CPI minus food and energy. - term created by the media not the BLS - excludes food and energy because of high short-term volatility

Barometers of Economic Activity

Indicators of business cycle phases: - leading - coincident - lagging Published on a monthly basis by The Conference Board

Coincident (or Current) Indicators

Indicators that show where we are. Economic measurements that change directly and simultaneously with the business cycle. Widely used includes: - Non-agricultural employment - Personal income, minus Social Security, veteran benefits, and welfare payments - Industrial Production - Manufacturing and trade sales in constant dollars

Lagging Indicators

Indicators that show where we have been. Measurements that change four to six months after the economy has begun a new trend and serve to confirm the new trend. Help analysts differentiate long-term trends from short-term reversals that occur in any trend. Include: - Average duration of unemployment - Ratio of consumer installment credit to personal income - Ratio of manufacturing and trade inventories to sales - Average prime rate - Change in the CPI for services - Total amount of commercial and industrial loans outstanding - Change in the index of labor cost per unit of output (manufacturing)

Leading Indicators

Indicators that show where we're going. Economic activities that tend to turn down before the beginning of a recession or turn up before the beginning of a business expansion. - used to predict the future direction of economic activity 4 to 6 months prior. Include: - Money supply - Building permits (housing starts) - Average weekly initial claims for unemployment insurance - Average weekly hours, manufacturing - Manufacturers' new orders for consumer goods - Manufacturers' new orders for non-defense capital goods - Index for supplier deliveries: vendor performance - Interest rate spread between 10-year Treasury bond and the federal funds rate - Stock prices - Index of consumer expectations

Unemployment Level

Key indicator of a country's economic health with a relationship to inflation. - 4% level reflects full employment: wage pressures do not create undue inflation.

Balance of Trade

Largest component of a country's balance of payments, comparing exports to imports.

Gross National Product (GNP)

Measure of economic activity that includes GDP, the income a country's citizens earned abroad, and excludes the income foreigners earned domestically. Measures the output generated by the country's citizens regardless of where they did so.

Balance of Payments

Measures all the nation's import and export transactions with those of other countries for the year. The account contains: - all payments and liabilities to foreigners (debits) and all payments and obligations (credits) received from foreigners

Foreign Account Credit

Money is coming in to US. - interest on loans - money invested in US

Foreign Account Debit

Money leaves US shores - loan given out - dividends paid out

Consumer Price Index (CPI)

Most commonly used measurement of the rate of inflation. Measure of the general retail price level. - compares the current cost of buying a basket of goods with the cost of buying the same basket a year ago. - indicates changes in cost of living - attempts to measure the rate of increase or decrease in a broad range of prices, such as food, housing, transportation, medical care, clothing, electricity, entertainment, and services. Published on a monthly basis by the Bureau of Labor Statistics (BLS)

Changes in Leading Indicators

Not all of these move in tandem. - A positive change in a majority of them points to increased spending, production, and employment. Resulting in an increase to the rate of inflation. - A negative change in a majority of these can forecast a recession.

American Depositor Receipt (ADR)

Simplest way an investor can protect against a weakening US dollar and invest in foreign securities.

Economic Indicators

Statistical indicators used to measure the economic health of a country at a given time.