Looking Into Economic Indicators
Economic indicators have a massive impact in the market. It is a must that one knows how to interpret and analyze these for you to be able to tell the overall health of a particular economy as well as your investments.
If you are looking forward to knowing what economic indicators are and their effects on the market, you have come to the right post to better learn such concept.
What are Economic Indicators?
Economic indicators are forms of economic data, generally on a macroeconomic level. These data are being used by analysts for them to be able to interpret both present and prospective investments and / or for them to be able to assess the economy in general.
There are types of economic indicators in which data is being released by the government and some non-profit organizations.
What are the usual examples of Economic Indicators?
The usual examples of economic indicators are the consumer price index (CPI), gross domestic product (GDP), unemployment figures and even crude oil price.
The three main categories of economic indicators are as follows: leading indicators, coincident indicators, and lagging indicators. They follow a certain schedule where they are set for release which gives investors ample time to prepare and strategize for a better and advantageous plan.
- Leading Indicators
Such type of indicators is being used to predict the potential movements or direction of a particular economy. Examples are consumer durables, net business formations and even share prices.
- Coincident Indicators
This type of indicators can be observed along with economic activities. Examples are GDP, employment levels and retail sales.
- Lagging Indicators
Such indicators can only be observed after a certain economic activity happens. Examples are gross national product (GNP), CPI, unemployment rates and interest rates.
What is the importance of Economic Indicators?
Since economic indicators are major statistics, they can tell where a certain economy is headed at.
What are the common downsides of Economic Indicators?
Economic indicators are only helpful if one is able to fully understand and interpret it correctly. Going back in history, GDP data and other growth indicators (i.e. corporate profit growth) show strong associations on economic growth.
Yes, economic indicators are helpful – but, they aren’t enough signs to perfectly know the direction of a specific economy. If you want to somehow precisely know economic performance, it is advisable that you look into other sets of data along with these economic indicators.
A prudent investor must be able to know the basics to be able to come up with a guided decision and a sensible financial and economic forecast for his or her use. To be able to quantify and fully understand current industry conditions, one can employ such concept.
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