What Are Economic Indicators And How Can You Use Them To Your Advantage?

For an investor, reading signs in the economic world is a huge step in making or losing money.

The leading economic indicators are chosen because of their economic importance, statistical adequacy, consistency of business cycle and expansion conformity. They are also made up of various sectors that reflect the general U.S economy. There are nearly twenty different economic indicators, but, ten will only be mentioned here.

For an investor, knowing the economic world is a huge step in making or losing money. The first step in understanding the economic world is learning economic indicators as a whole. The Gross National Product is the most important because it is the sum of all goods and services produced in the United States by the end of the year, which is known also as the fourth quarter. The formula of the Gross National Product is consumptions plus investments plus government expenditures and exports added together minus the imports to get the final answer as to where the economy is.

Car Sales are the first hint to both a sagging, or, booming economy. When a consumer cuts back on spending, usually it is buying a car. Car sales are very sensitive to interest rates which tend to go up when the economy is bad or getting worse.

Retail Sales provide economists with the strength and weakness of consumer dollar spending for a given month. It provides how much is being spent on purchased goods. Economists track chain store data sheets to evaluate the general merchandise and apparel categories which together account for about seventeen percent of retail sales. The retail sales data are collected monthly by the Census Bureau of the Department of Commerce, and broken down into two categories. These categories are durables and non durables. Durables are dominated by automobile sales which are sixty percent of durable sales. The nondurable sales are building materials, hardware, furniture, home furnishing and household appliance sales which are all accountable.

Industrial Production and Capacity Utilization provides information about the goods producing sector of the economy. When this economic indicator rate gets too high, the Federal Reserve which controls interest rates and inflation rates tend to tighten the money supply. The IPCU usually affects the price range of inflation which is monitored being compared with the Production Price Index, which is another economic indicator.

Housing Starts and Building Permits sector is very volatile reacting to the slightest economic recovery and recession. This is such an indicator which deals in the licensing and building of brand new homes all over the nation. It accounts for twenty seven percent of the overall economy and is affected mainly by interest and mortgage rates.

The Consumer Price Index is an example of an economic list which measures consumer price level bases and how inflation affects those prices in a year. It reflects prices of food, clothing, shelter, fuels, transportation fares, doctor and dentist fees and services. Prices are collected from over eighty urban places in the nation.

Personal Income and Consumption Expenditures is an economic list which represents over one-half of the Gross National Products. It represents over one-half of the total goods and services in the market purchased by people. The income provides the fuel for further spending involving both the consumer and producer.

Producer Price Index is a list which measures the commodity prices and cost of the capital goods which are not reported in the Consumer Price Index. Not reported also is the equipment category which is nearly thirty percent of the PPI, while the rest is consumer related goods. Federal Reserve restraint, wage and price control and guide lines are also reported. Thousands of commodities are priced and compared through and reported by the U.S Labor Department.

Employment numbers list is the most important monthly economic indicator. It helps redefine the Gross National Product estimate for any quarter of the year. Information kept and compiled are hours worked and payroll employment. Industrial production pays close attention to this list as well do economists. This list also helps to determine the rate of the unemployed.

Durable Goods Orders provide information on market participants, and its activity with supply and demand manufacturing. If piles of orders grow, production and pacing are affected. This affects things such as the rising of prices, labor costs, and even hiring of manpower.

An investor with the proper knowledge of the economic indicators will be able to invest smartly with very little problems ahead.

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