Economic Indicators
Article courtesy of FinancialContent
By Chris Stallman
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A doctor
attends numerous years of medical school, internships, and residencies
in order to keep the health of the people well. The economy's
health is also important but keeping the economy healthy is no job
for doctor's - it's a job for the government.
The health
of the economy is important to everyone, whether they are teenagers
or working-class citizens. The reason for this is because the economy
affects our daily lives. That's why various committees created
by the government are assigned to help keep the economy healthy.
These committees and agencies all look at numerous
economic indicators. As its name suggests, an economic indicator
is a number that gives people an idea of how their economy is doing.
A few major economic indicators are the producer price index, consumer
price index, jobless claims, new factory orders, durable goods report,
and housing starts.
The Producer Price
Index and the Consumer Price Index
The producer
price index (PPI) and the consumer price index (CPI) are two heavily
watched indicators that gauge the economy's inflation. The PPI
measures the change in the costs of producing a good while the CPI
measures the change in cost of buying that good. Rising PPI or CPI
numbers suggest that inflation is rising, so the government intervenes
to help slow the inflation.
Jobless Claims (Unemployment)
The jobless
claims (unemployment) report is also extremely important in judging
the health of the economy. This report indicates the amount of people
filing for unemployment and gives people an idea of how many people
are losing their jobs. A strong and growing economy has a higher
need for workers, so during this time the jobless claims report
should be fairly low. But during a slowed economy, many companies
need to lay off more workers in order to stay in business, so during
this time the report should be higher than usual.
New Factory Orders
This report
gives people an idea of how people feel about the economy. It does
this by recording the dollar amount of orders reported by manufactures.
Rising orders indicate that people are confident about the economy
while declining orders shows that people are starting to feel uncertain
and less willing to spend their money.
The Durable Goods Report
This is another
report that shows the consumers' confidence about the economy.
This report measures the amount of orders for durable goods such
as cars, airplanes, home appliances, and so forth. When the economy
is strong and people are confident, they are more likely to purchase
more expensive products such as durable goods, but when the economy
is at a point where consumers are uncertain, there are less orders
made.
Housing Starts
The housing
starts report is another extremely important indicator of the economy's
health. This report measures the amount of building permits issued
and determines the demand for new housing. An economy that is growing
rapidly has an increased demand for housing. Economies that are
slowing are usually accompanied by a decline in the housing starts
report.
These indicators provide excellent ways of determining
the future of our economy and can help you with a few of your financial
decisions. But many people often blow these numbers out of proportion,
which can make the short-term more volatile. We cannot stress enough
to not worry too much about the short-term and keep your focus on
what your long-term goals are. Holding your investments through
these small bumps in the stock market is usually the best way to
go.
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