Economic Indicator

What is an Economic Indicator?

The economic indicator refers to a piece of economic data usually on the macroeconomic scale, and is mostly utilized by economists and analysts for interpreting current or future possibilities for investments. The given set of indicators also helps in analyzing the overall Economy’s health.

Economic indicators are known to be anything that the investors would consider choosing. However, there are some particular sets of data that are released by the government as well as non-profit organizations that are followed all across the world. Some of these indicators are:

• GDP –Gross Domestic Product
• GNP –Gross National Product
• CPI –Consumer Price Index
• Crude oil’s price
• Unemployment rates

An Insight into Economic Indicators

Economic indicators are known to be divided into multiple groups or categories. Most of the common indicators tend to have a proper schedule for release. This allows investors to prepare as well as the plan upon observing specific information at particular instances of the month and year.

Some of the leading indicators includes consumer durables, yield curves, share prices, and net business formations, are utilized for predicting the future movements of the economy. The data or numbers on the respective guideposts are expected to move or fluctuate before the economy –this is the reason for the given name of the category.

Coincident indicators includes items like employment rates, GDP, and retail sales, are observed with the occurrence of particular economic activities. The given class of metrics reveals the activity of a specific region or area. Most of the economists and policymakers are known to make use of the given real-time data.

Lagging indicators –commonly interest rates, unemployment levels, GNP, CPI, and others, are observed only after the occurrence of a particular economic activity. As per the name of the indicator, the given data sets are known to reveal information only after the particular event has occurred. The trailing indicator serves to be a technical indicator –happening after a major economic shift.

Interpretation of Economic Indicators

An economic indicator turns out to be useful only when it is capable of interpreting correctly. History has revealed the presence of strong correlations between corporate profit growth and Economic Growth (as revealed by the GDP). However, the determination of the fact whether or not a particular company might increase its overall Earnings on the Basis of a single GDP indicator might be nearly impossible.

There is no denying in the overall importance of GDP, interest rates, and ongoing home sales, along with other indexes. This is because what you might be measuring in actual terms is the overall spending, the cost of money, the activity level of a significant portion of the entire economy, and investments.

The presence of a strong Market is known to indicate that the respective earning estimated are upwards. This offers the suggestion that the entire economic activity is also up.