An economic indicator is simply any economic statistic, such as the unemployment rate, GDP, or the inflation rate that indicate how well the economy is doing and how well it is going to do in the future. To understand economic indicators, we must understand the ways in which economic indicators differ.
Three Attributes of Economic Indicators
Relation to the Business Cycle / Economy
- Procyclic: A procyclic (or procyclical) economic indicator is one that moves in the same direction as the economy. 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 this type of economic indicator.
- Countercyclic
- The unemployment rate gets larger as things get worse, so it is a countercyclic indicator. The number of home runs the Montreal Expos hit in a year generally has no relationship to the health of the economy and is generally of little use. The United States Congress publishes economic indicators monthly.
International Trade
these are a measure of how much the country is exporting and how much they are importing
- Industrial Production and Consumer Prices of Major Industrial Countries
- U.S. International Trade In Goods and Services
- International Transactions
- The balance of trade is countercyclical as imports outweigh exports during boom periods.
Total Output, Income, and Spending
These tend to be the broadest measures of economic performance and include such statistics as: Gross Domestic Product (GDP), Real GDP, Business Output, National Income, Consumption Expenditure, Corporate Profits, Real Gross Private Domestic Investment, etc.
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), bank credit at All Commercial Banks, consumer credit, interest rates, stock prices and yields, and stock market returns
Employment, Unemployment, and Wages
These statistics cover how strong the labor market is and they include the following: The Unemployment Rate [monthly], Level of Civilian Employment, Average Weekly Hours, Hourly Earnings, and Weekly Earnings
Federal Finance
These are measures of government spending and government deficits and debts: Federal Receipts (Revenue), Federal Outlays (Expenses), and Federal Debt
Production and Business Activity
These statistics cover how much businesses are producing and the level of new construction in the economy
- Industrial Production and Capacity Utilization
- New Construction
- -New Private Housing and Vacancy Rates
- -Business Sales and Inventories
- -Manufacturers’ Shipments, Inventions, and Orders
Prices
This category includes both the prices consumers pay as well as the prices businesses pay for raw materials.
