Economic Indicators

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 OrdersThis 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 ReportThis 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 StartsThe 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.