what are economic indicators and why are they important?
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As their name suggests, economic indicators are statistics which are used to obtain a clearer picture of the current state of the economy. Three of the most important examples are the rate of inflation, the gross domestic product (GDP) and the percentage of the population that is unemployed.
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Economic indicators represent statistical data showing past or future trends in an economy. Government agencies, think tanks and watchdog groups may calculate various economic indicators based on financial information. ... Individuals and businesses often use economic indicators to make financial decisions.
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More output or revenue is produced from the same amount of resources. Why is productivity so important? Productivity is one of the key drivers of economic success. The more productive a country's workers are, the more value they can bring to their employers and therefore their home nation's economy.
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Business cycle indicators (BCI) are a composite of leading, lagging, and coincident indexes created by the Conference Board and used to forecast changes in the direction of the overall economy of a country.
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GDP is usually one of the economy's primary indicators. GDP is defined as the total market value of all officially recognized products and services that are produced within a specific time period. NDP is the estimated value on the country's amount of spending in order to maintain its current GDP.
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Importance of GNP Economists rely on the GNP data to solve national problems such as inflation and poverty. When calculating the amount of income earned by a country's residents regardless of their location, GNP becomes a more reliable indicator than GDP.
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To assess the economic development of a country, geographers use economic indicators including: Gross Domestic Product (GDP) is the total value of goods and services produced by a country in a year. ... Economic growth measures the annual increase in GDP, GNP, GDP per capita, or GNP per capita.
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GDP is also an indicator of human welfare. In cross-country data, GDP per capita is highly correlated with other factors that are important for welfare. In particular, it is positively correlated with life expectancy and negatively correlated with infant mortality and inequality.
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Personal consumption drives almost 70% of economic output. That's measured by gross domestic product. Personal consumption is an important economic indicator. It's the main workhorse that drives economic growth, making it a key component of GDP.
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['Inflation – Inflation measures the cost of goods and services. ... ', 'Employment – People with jobs can spend and invest. ... ', 'Housing – In a land of increasing house prices, banks lend and the economy booms. ... ', 'Spending – We live in a consumption-based society. ... ', 'Confidence – Although it is elusive, confidence drives everything.']
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So what is the difference between the GDP and GPI? GDP shows economic activity, measuring all goods and services produced in a given period. ... GPI looks at a combination of economic, environmental, and social indicators to create a picture of the overall progress of a country or state.
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Other lagging indicators are economic measurements, such as gross domestic product (GDP), the consumer price index (CPI), and the balance of trade. These indicators differ from leading indicators, such as retail sales and the stock market, which are used to forecast and make predictions.
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['Relevance: There is a clear relationship between the indicator and FP/RH;', 'Accuracy: The indicator measures what it purports to measure;', 'Importance: The measurement captures something that "makes a difference" in program effectiveness;']
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['Three Types. There are three types of economic indicators: Leading, Lagging, and Coincident.', 'Leading. Leading indicators help to predict what the economy will do in the future. ... ', 'Lagging. Lagging indicators confirm what leading indicators predict. ... ', 'Coincident. Coincident indicators mirror what the data is saying.']
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Perhaps the best indicator of economic performance is unemployment. Watch unemployment closely in 2020. We're currently at 3.5% unemployment, a move up to 4% could easily mean recession, but if we drift closer to 3% in 2020 then that's likely enough to keep the economy growing.
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['Political factors relate to how the government intervenes in the economy. ... ', 'Economic factors include economic growth, exchange rates, inflation rate, and interest rates.']
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NFP data is important because it is released monthly, making it a very good indicator of the current state of the economy. The data is released by the Bureau of Labor Statistics and the next release can be found on an economic calendar. Employment is a very important indicator to the Federal Reserve Bank.