There is voluminous information and statistics put out by government agencies, non-profits, private companies and pundits as they track the economy. However, there are some basic key indicators that economists and government officials rely upon, and you should be aware of what they are.
Listed below are some of the most important indicators to watch.
GDP. Gross Domestic Product is the broadest of the nation's measurement, updated by the Bureau of Economic Analysis. GDP is the market value of all final goods and services produced in the nation during a certain time period, measuring the health and wealth of the economy. About two-thirds of our GDP is driven by individual consumption, not by business or government. The Federal Reserve uses the data (with other data & indicators) to help determine their actions on interest rates.
A recession is officially defined as negative growth in the GDP for two or more successive quarters. Technically, our current recession has ended since the GDP was up in the third and fourth quarter of 2009. After retracting 6.4% in the first quarter of 2009 and then 0.7% in quarter two, the economy grew 3.5% in the third quarter and 5.7% in the fourth quarter. (Source: U.S. Department of Commerce, Bureau of Economic Analysis).
S&P 500 Stock Index (S&P 500). The Standard and Poor's 500 is made up of major companies in various industries (financial, industrial, utilities, transportation). This is a market value-weighted index of large-cap common stocks and their performance is thought to be representative.This basket of stocks has become one of the industry benchmarks. A declining index (as we dramatically saw last year) can sometimes signal a tightening of belts for businesses and consumers and related problems in the economy (or credit markets, for instance). While the index dropped more than 40% in 2008, the average in 2009 stood at 13.6% and to date in early 2010 it is increasing further.
Consumer Price Index (CPI). CPI is an inflationary indicator. It measures the average changes in the prices paid for a fixed basket of goods and services, and is sometimes a tool for measuring the cost of living. CPI includes food & beverages, housing costs, clothing, medical care, utilities, education and transportation (among other products or services). It does not include income, investments in stocks or bonds, life insurance or social security taxes. The January 2010 CPI rose 0.2%; in 2009, the index increased 2.6% before seasonal adjustments. (Source: U.S. Department of Labor, Bureau of Labor Statistics)
Current Employment Statistics (CES). CES is the data on national employment, unemployment, and non-agricultural industries, and the information is released monthly. Employment statistics are an early indicator of economic trends, level of business activity and health; yet they are usually the trailing or lagging indicator coming out of a recession. Unemployment is an issue today while some other areas of the economy have recovered. (Source: U.S. Department of Labor, Bureau of Labor Statistics)
Housing Starts.Formally known as the new residential construction index, this data represents new construction projects started (issued monthly). The data is highly sensitive to changes in the mortgage rates, general business health, and because it is represents about 4% of the GDP, it can signal changes in the economy. According to the Congressional Budget Office (document 3183), housing starts peaked at over 2.1 million in the first quarter of 2006 (helped by low interest rates and easy lending standards). By the 2nd Quarter of 2008, the starts were cut almost in half to 1 million, and decreased to 900,000 in the 3rd Quarter. Housing start recovery will depend upon clearing out excess inventory, demand, access to credit and unemployment. (Source U.S. Department of Commerce, Census Bureau).
Consumer Confidence Survey. Finally, this is the temperature of the public's confidence about the U.S. economy and situation. The survey shows either optimism or pessimism of consumers. Five questions are asked of a random sampling of 5,000, and the data is released monthly. While still mixed and relatively low, the index has risen for three consecutive months, standing at 55.9 in January 2010.
Kathy writes about commercial real estate and the overall economy. She is President of a commercial real estate firm, Legacy Real Estate & Investments, and author of "Effortless Cash Flow: The ABCs of TICs Article Source: http://EzineArticles.com/?expert=Kathy_Heshelow |  |
(Tenant in Common Properties)" and "
". Kathy is working on a new real estate book for 2010.
No comments:
Post a Comment