Economic Indicator Forecast An economic indicator is a statistic of the current status of the economy. This can predict how the economy may perform in the future. Investors and other private or government organizations use this information as a tool to make business decisions. By gathering historical data about the economy and comparing it to current trends, one can compile a snapshot of economic fluctuations. The direction of an indicator may vary according to changes in the economy. The indicator can be leading, lagging, or coincident. Leading indicators are changes before the economy has recognized the changed. Lagging indicators do not change until a few quarters after the economy has change. Coincident indicators move at the same time as the economy (The Library of Congress, 2005). Some of the common indicators are GDP, Unemployment Rate, Inflation Rate, Capacity utilization, Auto sales, and Personal income. As the explanation of these six indicators will be use to forecast the future of the economy, the trend of these indicators will also be used to evaluate the economy's historical and future outcome. Inflation Rate The Congressional Budget Office (CBO) projects that inflation, as measured by the year-to-year change in the consumer price index for all urban consumers (CPI-U), is projected to decline from 2.8% this year to 2.3% next year. Rates of inflation for food and energy prices, which increased during the first half of this year are expected to be moderate. This should keeping overall inflation lower than in the recent past. In addition, the underlying rate of consumer price inflation is expected to be relatively stable, averaging slightly above 2% over the next year and a half (Congressional Budget Office [CBO], 2007). Oct 2007 Nov 2007 Dec 2007 Jan 2008 Feb 2008 Mar 2008 Forecast Value 2.30 2.13 1.89 1.88 1.79 2.01 Inflation rate in the U.S. economy will decelerate in 2007 and hold nearly steady over the following two years, according to 49 forecasters surveyed by the Federal Reserve Bank of Philadelphia. Measured on a fourth-quarter over fourth-quarter basis, inflation rate will fall to 2.3% this year and hold steady at that rate in 2008 and 2009. An alternative measure of core inflation, the rate of change in the price index for personal consumption expenditures (PCE), is also expected to decelerate, to 2.0%, in 2007 before rising to 2.1% in 2009. Core inflation measures the rate of change in a price index that excludes the prices of food and energy. This is the first Survey of Professional Forecasters to report projections for core inflation (Federal Reserve Bank of Philadelphia, 2007).
A monthly release from the Bureau of Labor Statistics (BLS), the PPI shows trends within wholesale markets, manufacturing industries, and commodity markets. All industries that produce physical goods that make up the economy of the United States. They are included, but not imports. Taking into consideration, the PPI measures the purchases of goods and services completed by urban households, the average changes over time in the sale prices received by domestic producers, and the sales at all production levels for producers in the United States. This includes sales of unfinished products used throughout the production and production chain. The PPI can serve as a principal indicator of definitive price changes at the consumer level, and of inflation if the trend in the PPI is higher. Low inflation is good for stimulating consumer spending, corporate profits and, ultimately, the stock market. The rise in inflation can be a sign of an overheated economy and potentially higher interest rates. On the other hand, the PPI can give analysts, business executives, and investors with information on price trends at various stages of the production process. This is useful for companies in making capital investment decisions, for analysts in tracking economic trends and for investors looking for clues about future inflation. Also, the PPI can offer analysts, business executives, and
If inflation rate is high the base rate might increase and more people will decide to save money than spend which could decrease demand and retailers decide not to increase prices so inflation rate slowly goes. My view of
Economic indicators are Governmental statistics, released on a regular basis, which indicate the growth and health of a country. Economic indicators often affect and influence the value of a country's currency. The Trade Deficit, the Gross National Product (GNP), Industrial Production, the Unemployment Rate, and Business Inventories are examples of economic indicators. We will be dealing with four specific indicators: interest rate, inflation, unemployment, and employment growth as well as Real Gross Domestic Product (GDP). Real GDP is so called because the affects of inflation and depreciation are accounted for in the figures.
The United States economy is an ever-changing and dynamic system. It is a structure that is made up of people who make critical financial decisions every hour of every day. Every organization, from Wall Street giants to the guy selling hot dogs on the street, is effected by the movements of the overall economy. These economic movements, or trends, can push sales for some, or put others out of business. Though they are intangible, these forces can still be measured, studied, and presented in the form of economic indicators. They can take the form of anything from the productivity of the overall economy, to the supply of money in it. This paper will review the economic indicators Consumer Sentiment Index and the Unemployment Rate and see how they affect theme park giant, Six Flags.
“Measurement error in the consumer price index: where do we stand?” has provided a detailed analysis of the causes of bias in the US consumer price index and the uncertainty behind both previous and their own estimates. Of these, upper-level substitution and quality or quantity changes have proven both the most significant and the most controversial. With the figure for the bias calculated at a plausible 0.87%, it has been made clear the practical implications of their argument across the economy, and that policy makers must keep track of bias estimates and inform their choices acknowledging them.
There are very many different economic indicators that are used to analyze economic activity of a company, industry, country, or region. There are three different general trends (directions for prices or rates) in the economy. "Those with predictive value are leading indicators; those occurring at the same time as the related economic activity are coincident indicators; and those that only become apparent after the activity are lagging indicators. Examples are unemployment, housing starts, Consumer Price Index, industrial production, bankruptcies, GDP, stock market prices, money supply changes, and housing starts also called business indicators." (http://www.investorwords.com/1643/economic_indicator.html)
In this section I will be discussing how inflation rates have increased over the past 40 years, and what effect this has had on monetary growth. Inflation rates are defined as the rate of change in price levels in our economy especially Canada. Surveys are conducted quarterly or monthly to determine and generate a Consumer Price Index. The CPI is conducted with a “basket of goods” to determine changes in consumer prices for Canadians. It is important to study and analyze the rate of inflation because it helps the government determine how the dollar value has changed over a period of time. Also to adjust pending contracts and initiate new pensions which have to take into account the effect of inflation. Less well-off people and elderly are more
The suite of Consumer Price Index insights is utilized by economic specialists and managers as a macroeconomic marker. The insights can be utilized to advice choices on monetary and government strategy. Various government divisions utilize Consumer Price Index statistics to screen how costs for particular products or administrations contrast and general levels of
“Macroeconomic indicators include economy-wide phenomena such as unemployment rates, national income, rates of growth, gross domestic product, inflation, and price levels” (Page & Stevens, 2005).
Consumer Price Index is, in essence, a “bucket of goods” that is tracked to help determine how much prices of these goods rise or fall overtime. This gives a representative view of how strong or weak the economy is, and is also a measurement of inflation. When the prices of goods rise, it indicates growth and possible inflation compared to an earlier observation. If the price falls, it shows a possible recession or even strengthening of the dollar.
Bureau of Labor Statistics. This report reveals the unemployed rate in the US, except government, farm and non-profit workers. That covers some 80% of the US working force. A decrease in the unemployed rate, i.e. there are more people working, usually indicates the market is growing. As a result the American Dollar will grow stronger. If a trader speculated that beforehand, and opened buying positions prior to the announcement – the outcomes would be to his favour. Naturally, if the unemployed rate rises the Dollar will weaken. Either way, the NFP and the speculations beforehand will cause vibrations in different
A lot can be learnt from this economic indicator. High levels of inflation indicate an unp...
In summation, based on these three but important economic variables one can expect slight improvements for the economy in different aspects. The best news appear to be an expected rise in projected consumer spending, while a steady unemployment rate is expected, and small but substantial growth in GDP seems to be around the corner thanks to an encouraging PMI that reports expansion at a lower rate.
Today, these countries can claim considerable success in reducing both inflation and inflationary expectations. For example, despite the run-up in energy prices in 2000, consumer price inflation rates from 1999.Q3 through 2000.Q3 fell to 3.5% in the U.S., to 3.2% in the U.K., to 1.6% in the EMU countries, to 2.7% in Canada, to 0.9% in Sweden, and to 3.0% in New Zealand. Japan, with an inflation rate of -1.2%, is something of a special case, as it is just beginning to emerge from a prolonged recession.
For the individual who watches CNN a great deal, the term Economic Indicators well recognized. However, for the individual who chooses not to make CNN a primary station, the term Economic Indicators can be extremely confusing. Economist often use very unlike terms when referring to the fluctuating economy. Economic Indicators happens to be one of the many terms that they use. So, what exactly are Economic Indicators, and what purpose do they serve? In addition to the previous stated questions, are they really that important?