Economic Indicators

- Overview

Economic indicators are statistical representations of data that help assess the health of a country's economy. They can include measures of macroeconomic performance and stability. Examples of economic indicators include:

• Gross Domestic Product (GDP)
• Consumer Price Index (CPI)
• Unemployment figures
• Inflation
• Industrial production
• Retail sales
• Funding supply
• Stock price
• Banking indicators

Economic indicators help individuals and entities make more informed investment decisions. Analysts and policymakers use economic indicators to evaluate investment opportunities, interpret trends, and predict the future.

Economic indicators can be any indicators investors choose, but some indicators published by governments and non-profit organizations are widely followed. These include:

• Consumer Price Index (CPI)
• Gross Domestic Product (GDP)
• Unemployment figures

Economic indicators going back to 1948 are available through FRASER (Federal Reserve Archive System for Economic Research).

Indicators in the economic section allow us to analyze various aspects of national and global economic activity. Economic indicators measure levels and changes in the size and structure of different economies and identify growth and contraction as countries produce goods and services and consume them domestically or trade them internationally. 

Economic indicators include measures of macroeconomic performance (gross domestic product [GDP], consumption, investment, and international trade) and stability (central government budgets, prices, money supply, and balance of payments). It also includes broader measures of income and savings adjusted for pollution, depreciation and resource depletion. 

- Economic Data

Economic data are data that describe the actual economy in the past or present. These usually exist in the form of time series, that is, covering multiple time periods (such as the monthly unemployment rate over the past five years) or cross-sectional data over a period of time (such as the consumption and income levels of a sample of households). Data can also be collected through surveys of individuals and firms[1], etc., or aggregated to sectors and industries of a single economy or an international economy. A collection of these tabular data forms a dataset. 

Economic data are organized according to internationally agreed statistical standards: the System of National Accounts (SNA) provides a complete, integrated system of accounts that allows for international comparisons of all significant economic activity; the Balance of Payments (BoP) monitors a country's international transactions; Government Finance Statistics, which monitors government revenue and expenditure; and monetary and financial statistics.

- The Consumer Price Index (CPI)

The Consumer Price Index (CPI) is a price index that is the weighted average price of a basket of consumer goods and services purchased by households. Changes in the measured CPI track changes in prices over time.

The CPI measures monthly changes in prices paid by U.S. consumers. The U.S. Bureau of Labor Statistics (BLS) calculates the CPI as a weighted average of the prices of a basket of goods and services that represents total U.S. consumer spending. 

The CPI report uses different survey methodology, price samples, and index weightings than the Producer Price Index (PPI), which measures changes in prices received by U.S. producers of goods and services.

The CPI is one of the most popular indicators of inflation and deflation. The CPI is the most widely used measure of inflation, followed by policymakers, financial markets, businesses and consumers.

The CPI is based on an index covering 93 percent of the U.S. population, while a related index covering working-class and civilian workers is used in cost-of-living adjustments for federal benefits.

The CPI is based on approximately 80,000 quotes collected each month from approximately 23,000 retail and service establishments and 50,000 rental housing units.

Housing rents are used to estimate changes in housing costs, including owner-occupied housing, which accounts for about one-third of the CPI.

- Phillips Curve

The Phillips curve shows the relationship between inflation and unemployment. In the short run, inflation and unemployment are inversely related; as one quantity increases, the other decreases. In the long run, there are no trade-offs. 

The Phillips curve links inflation to unemployment. The Phillips curve holds that unemployment and inflation are inversely related: as the level of unemployment falls, inflation increases. However, this relationship is not linear. Graphically, when unemployment is on the x-axis and inflation is on the y-axis, the short-run Phillips curve is L-shaped.