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Economic Indicator
by Mia Fawcett
Category : Economy |
The economy is very sensitive today. There are many factors that affect the economy and many of them come in an unexpected way. There is so much information you can find about the economy today. The rising inflation, volatile crude oil price, high gold prices, fed rate hike etc are some of the valuable information that can help you to take wise decisions on your investment.
To understand economic indicators, we must understand the ways in which economic indicators differ. Economic Indicators can have one of three different relationships to the economy. Procyclic economic indicator is one that moves in the same direction as the economy. So if the economy is doing well, this number is usually increasing, whereas if we're in a recession this indicator is decreasing. Gross Domestic Product (GDP) is an example of a procyclic economic indicator. Countercyclic economic indicator is one that moves in the opposite direction as the economy. The unemployment rate gets larger as the economy gets worse so it is a countercyclic economic indicator. And acyclic economic indicator is one that has no relation to the health of the economy and is generally of little use.
Sometime economic indicator also called macroeconomic indicator. Macroeconomic inputs include Gross Domestic Product/ Economic Growth GDP), Interest Rates, Government Budget Surpluses/Deficits, Trade Balances, Commodity Prices, Relative Currency Exchanges Rates, Inflation and Corporate Earnings (both for individual companies and the broad collection).
Economic Indicators can be leading, lagging, or coincident which indicates the timing of their changes relative to how the economy as a whole changes. Leading economic indicators are indicators which change before the economy changes. Stock market returns are a leading indicator. Leading economic indicators are the most important type for investors as they help predict what the economy will be like in the future. Lagged economic indicator is one that does not change direction until a few quarters after the economy does. Unemployment rate is a lagged economic indicator. Coincident economic indicator is one that simply moves at the same time the economy does. The Gross Domestic Product is a coincident indicator.
In addition, there are many markets, currency, economic, political, business, technological and other risks that are beyond our control. Readers must make their own independent investment decisions.
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