DEFINITION  An economic indicator is a statistic about an economy.  It is a piece of data of macroeconomic scale that is used to interpret the overall health of the economy.  It is also called business indicator.  Examples: unemployment, GDP

ATTRIBUTES  TIMING a. Coincident indicators These occur at the same time as the economic activity. They change at the same time as the economic activity. E.g. payroll, industrial production b. Lagging indicators It changes after the economy has begun to follow a certain trend. E.g. unemployment rate, change in the labor costs per unit of output

ATTRIBUTES c. Leading indicators It changes before an economy begins to follow a certain trend. It is used to predict changes and may not be always accurate. E.g. stock prices, inflation, interest rates

Relation to the business cycle  Pro cyclic It is an indicator that moves in the same direction as the economy. If the economy is doing well the number increases and if it is in a state of recession the number is decreases. e.g. GDP.

 Acyclic indicator It is an economic indicator that does not have any relation to the health of an economy and is generally of no use.

 Counter cyclic This has an inverse relationship and decreases with an increase in the overall health of the economy. This has an inverse relationship and decreases with an increase in the overall health of the economy. e.g. unemployment rate

 Frequency of data It refers to the frequency with which the indicators change and are made known to the public. Like the GDP figures are introduced every three months in some countries while some indicators change every minute.

GROSS DOMESTIC PRODUCT  It can be defined as the total market value of all goods and services produced within a country in a given period of time.  It includes personal consumption, government purchases, gross private domestic investment, exports less imports.  GDP=C+G+I+X-M

GROSS DOMESTIC PRODUCT  It is the most followed and understood indicator by the investors. An yearly growth of 2-3% is accepted as an overall benefit and is enough for corporate profit and job growth. This will ensure that the undue inflatory concerns are not enticed.

CONSUMER PRICE INDEX It is an index measuring the average price of consumer goods and services purchased by households. A percentage change in the CPI is a measure of inflation. This is also a very prominent and well accepted indicator. It is measured by considering the costs of a bundle of goods that includes food stuff, energy, services, luxury goods also.

UNEMPLOYMENT RATE  It can be defined as the total number of people actively seeking work out of the total number of employable people.  It can also be defined as the number of unemployed people as a percent of the work force.  A growing economy must show falling unemployment rates.

INDUSTRIAL PRODUCTION  It refers to the volume of goods produced by factories, mines and electric utilities.  It measures the changes in the output of the industrial sector.  These sectors’ contribution to GDP is less but it is sensitive to interest rates and consumer demand and so influences future GDP and economic performance

CAPACITY UTILISATION  It explains the extend to which an economy utilizes its installed capacity.  It is the relationship between the actual output and the potential output.  If demand rises the capacity utilization also rises. Hence this is also an indicator of the strength of the economy.

MONEY SUPPLY  It refers to the total amount of money circulating in the economy at a point of time. It includes the money in the hands of non bank public as well as in the bank accounts as deposits and other savings.  Increased money supply results in increased GDP.  A decrease slows down the economy.  It should not rise uncontrollably as it results in inflation.

INTEREST RATES  Interest is a fee paid on borrowed assets. The most commonly borrowed one is money.  Interest is the fee paid to the lender for foregoing other investments that could have been made with the borrowed money.  Higher interest rates shows the scarcity of money in an economy and hence is an indicator of the strength of an economy.  Interest rates are regulated from time to time by the government to encourage investment by issuance of loans.

INFLATION  The rate at which the general level of prices for goods and services is increasing.  It means that the value of the currency is decreasing and it requires more money to buy a product.  It may be due to demand pull.  It may also be due to cost push.  It may be due to government deficit.  A certain level inflation is good for the economy and it indicates the strength of the economy.

PRODUCER PRICE INDEX  It is another index used to measure the increase in price of goods and services at a wholesale level.  It was earlier called WPI.  Imports are not included in this.  It is again done for a basket of goods like CPI.  This is also an indicator of strength of the economy as it directly affects the CPI.

REFERENCES         Macroeconomics by Stanley Fischer