ECONOMIC INDICATORS
Understanding Economic Indicators

Background Economic Theme: Recognize the stage of
the business cycle.
Hodrick-Prescott Filter (lambda=1600)
10800
10400
10000
300
9600
200
9200
100
8800
8400
0
8000
-100
-200
96
97
98
99
USAGDP
00
01
Trend
02
03
Cycle
04
Cycle of the Indicator

Leading indicator: used to predict changes in the
economy. Its trajectory changes before the economy
follows a particular pattern. i.e. Conference Board LI

Coincident indicator: varies simultaneously with the
business cycle. It indicates current economic
conditions. i.e. industrial production

Lagged indicator: follows the business cycle with
lags. It illustrates where the economy has been. i.e.
corporate profits
Nominal vs Real
1000000
9000
900000
8000
800000
700000
7000
600000
6000
500000
400000
5000
300000
4000
200000
100000
95
96
97
98
99
00
01
M1 Nominal
02
03
04
3000
94
95
96
97
98
99
00
M1 Real
01
02
03
04
Adjusted vs Non-adjusted
1800000
1700000
1600000
1500000
1400000
1300000
1200000
96
97
98
99
00
Adjusted
01
02
Original
03
04
Growth Rates
.020
.06
.016
.05
.012
.04
.008
.03
.004
.02
.000
.01
-.004
96
97
98
99
00
01
02
GDP Quarterly Change
03
04
.00
96
97
98
99
00
01
02
GDP Year to Year Change
03
04
Indicators by Sector of Economic
Activity
GDP
 Published
by: Bureau of Economic
Analysis (BEA)
 Frequency: Quarterly
 Period Covered: Prior quarter
 Market significance: High

Best measure of economic activity
 Economic
Indicators.gov
Consumer Spending
Personal Income and Spending
 Published
by: BEA
 Frequency: monthly
 Period Covered: prior month
 Market significance: Moderate

Accounts for about 2/3 of real GDP but
undergoes frequent revisions
 Economic
Indicators.gov
Car and Truck Sales
 Published
by: Motor Vehicle
Manufacturers and Importers
 Frequency: Monthly
 Period Covered: Prior month
 Market significance: moderate

Leading indicator of economic activity.
Undergoes revisions.
Retail Sales
 Published
by: Bureau of the Census
 Frequency: Monthly
 Period Covered: Prior month
 Market significance: High

First indicator of consumer activity
 Latest Advance
Monthly Sales for Retail
and Food Services
Home Sales
 Published
by: Bureau of the Census
 Frequency: monthly
 Period Covered: prior month
 Market significance: moderate


Leading indicator of economic activity. High
volatility.
http://www.census.gov/cgibin/briefroom/BriefRm
Consumer Credit
 Published
by: Federal Reserve Board
 Frequency: monthly
 Period Covered: two prior months
 Market significance: moderate

Indicator of the financial health of consumers.
But comes in late.
Consumer Confidence Measures
 Published
by: University of Michigan, the
Conference Board, and ABC News.
 Frequency: monthly
 Period Covered: varies
 Market significance: moderate
Leading indicator of consumer spending.
http://www.conferenceboard.org/economics/ConsumerConfidence.cf
m

Industrial Activity
ISM Manufacturing Survey
 Published
by: Institute for Supply
Management (ISM)
 Frequency: Monthly
 Period Covered: Prior month
 Market significance: Very high


First report on industrial activity.
http://www.ism.ws/ISMReport/MfgROB.cfm?n
avItemNumber=12942
Industrial Production and Capacity
Utilization
 Published
by: Board of Governors of the
Federal Reserve System
 Frequency: monthly
 Period Covered: prior month
 Market significance: moderate

Good forecast of business cycle.
Housing Starts/Building Permits
 Published
by: Bureau of the Census
 Frequency: monthly
 Period Covered: prior month
 Market significance: moderate

Good predictor of business cycle.
Subject to revisions.
Durable Goods Orders
 Published
by: Bureau of the Census
 Frequency: monthly
 Period Covered: prior month
 Market significance: high

Key indicator on future manufacturing.
Construction Expenditures
 Published
by: Bureau of the Census
 Frequency: monthly
 Period Covered: prior month
 Market significance: low

Good coverage. But late and with major
revisions
 http://www.census.gov/const/C30/release.
pdf
Business Inventories and Sales
 Published
by: Bureau of the Census
 Frequency: monthly
 Period Covered: two prior months
 Market significance: low

Inventories affect the pace of future industrial
activity. But report comes in late.
Factory Orders and Manufacturing
Inventories
 Published
by: Bureau of the Census
 Frequency: monthly
 Period Covered: two prior months
 Market significance: low

Overlapping information with the Advanced
Report on Durable Goods
Productivity and Costs
 Published
by: BEA
 Frequency: quarterly
 Period Covered: prior quarter
 Market significance: moderate

Useful information about inflation,
however, it is subject to substantial
revisions.
Government Spending
Federal Budget
 Published
by: Treasury Department
 Frequency: monthly
 Period Covered: prior month
 Market significance: low
Foreign Sector
Merchandise Trade Balance
 Published
by: Bureau of the Census
 Frequency: monthly
 Period Covered: two prior months
 Market significance: moderate
 http://www.census.gov/foreigntrade/PressRelease/current_press_release/ft900.pdf
Current Account Balance
 Published
by: BEA
 Frequency: Quarterly
 Period Covered: Previous quarter
 Market significance: moderate
Foreign Industrial Productions

Japan Industrial Production
• Published by: Ministry of Economy, Trade and Industry,
Japan
• Frequency: Monthly
• Period covered: Previous month

China Industrial Production
• Published by: National Bureau of Statistics of China
• Frequency: Monthly
• Period covered: Previous month

German Industrial Production
• Published by: Federal Statistics Office, Germany
• Frequency: Monthly
• Period covered: Previous month
Global Manufacturing Purchasing
Managers Index
 Published
by: JP Morgan
 Frequency: monthly
 Period Covered: prior month
 Market significance: moderate
 http://www.ism.ws/ISMReport/content.cfm
?ItemNumber=17719
OECD Composite Leading
Indicators
 Published
by: OECD
 Frequency: monthly
 Period Covered: prior month
 Market significance: moderate
Labor Market
Employment (payroll employment and unemployment rate)
 Published
by: Bureau of Labor Statistics
(BLS)
 Frequency: Monthly
 Period Covered: prior month
 Market significance: very high

First complete look at economic activity.
 http://stats.bls.gov/news.release/pdf/empsi
t.pdf
Employment Cost Index
 Published
by: BLS
 Frequency: quarterly
 Period Covered: prior quarter
 Market significance: moderate

Comprehensive measure of labor cost. But published
only quarterly.
Unemployment Insurance Claims
 Published
by: U.S. Department of Labor
 Frequency: weekly
 Period Covered: prior week
 Market significance: moderate

Accurate in gauging labor market conditions.
Inflation
Producer Price Index
 Published
by: BLS
 Frequency: monthly
 Period Covered: prior month
 Market significance: high

Good measure of inflation.
Consumer Price Index
 Published
by: BLS
 Frequency: monthly
 Period Covered: prior month
 Market significance: high

Key measure of inflation
 http://stats.bls.gov/news.release/pdf/cpi.pd
f
Specialized Indicators
Cyclical Indicators
 Published
by: BEA/The Conference Board
 Frequency: monthly
 Period Covered: prior month
 Market significance: moderate