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Basics on Indicators
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Gross Domestic Product:

The GDP is the sum of the market values of all final goods and services produced by the resources (labor and property) of a country residing in that country. Goods once produced can be a part of the total product or remain as an intermediate product/spare etc. In this instance the goods intended for intermediary consumption is accounted seperately and the goods forming a part of a total product is inturn accounted separately.

GDP = C + I + G + (X – M )

C: Personal consumption
I: Gross provate domestic investments
G: Government spending.
(X-M): Net of exports and Imports.

Nominal VS Real GDP

Nominal GDP refers to GDP expressed in current dollar terms, where as the Real GDP is referred to GDP expressed using a specified based year. The later GDP figure gives an indication of a real increase or decrease against a specified base period and hence Is a most followed method.

Employment Situation

Nonfarm payrolls is catagrised into manufacturing jobs, construction jobs, and jobs in natural resources and mining. Service jobs, currently make up about 81 percent of total nonfarm payrolls. Economists pay particular attention to the growth rate of total private payrolls, that is, the number of employees on nonfarm and on governmental payrolls.

During periods of sub-par economic growth, economists ideally look at widespread growth in payrolls across several industries. If job creation is limited to the government sector, it may be a signal that private industry is not very confident with the economic environment and may not be willing to hire new workers.

Industrial production

Industrial production figures are based on the monthly raw volume of goods produced by industrial firms such as factories, mines and electric utilities in the United States. Also included in the industrial poduction figures are the businesses of newspaper, periodical and book publishing, traditionally labeled as manufacturing. The industrial production and related capacity utilization figures are considered coincident indicators, meaning that changes in the levels of these indicators usually reflect similar changes in overall economic activity, and therefore gross domestic product (GDP).

The Federal Reserve watches this figure closely because it understands that inflation shows itself first at the industrial level, when supplies of basic materials get tight - either for their manufacturers or for the corporate clients who buy them. Rises in the cost of commodities and materials will begin to get passed on down the line, ending up with individual consumers of higher-cost finished products.

Consumer Confidence Index (CCI)

The Consumer Confidence Index (CCI) is a monthly release from the Conference Board, a non-profit business group that is highly regarded by investors and the Federal Reserve. CCI is a unique indicator, formed from survey results of more than 5,000 households and designed to gauge the relative financial health, spending power and confidence of the average consumer.

Capacity Utilization

Capacity utilization is a measure of how close the nation’s manufacturing sector is to running at full capacity. The monthly capacity utilization rate is derived by dividing the monthly industrial production number by the monthly capacity figure.

Purchase Managers Index

PMI is primarily used to determine the progress of the manufacturing sector and provides an accurate picture of the broader economy as well. When strong postings are registered in the PMI, production, new orders, and employment indices, it is generally a safe bet that many of the nation’s manufacturers are experiencing some positive growth. A reading above 50 indicates economy expansion and a reading below 50 confirms the economy is in contraction.

Durable goods order:

Published monthly by the U.S. Department of Commerce’s Census Bureau, the report measures current activity and future commitments in the U.S. manufacturing sector. The equity market reacts positively to increases in new orders for durables, because they indicate new demand and an optimistic economic outlook. Conversely, a slowdown or decline in new orders implies a softer economic climate and less likelihood of a pickup in corporate profitability, which generally hurts the value of stock.

Jobless Claims report:

The Jobless Claims Report is a weekly release that shows the number of first-time filings for state jobless claims nationwide. The data is seasonally adjusted, as certain times of the year are known for above-average hiring for temporary work (harvesting, holidays). The Jobless Claims Report implies healthier the job market, the healthier the economy: more people are working and more increase in disposable income , inturn leading to higher personal consumption and gross domestic product (GDP).

Personal Income and Outlays:

While the other indicators like the jobless claims show a potentials of disposable income an employment can generate, the personal income and outlays confirms to the fact that the economy has a spending which can stimulate growth. Personal income is a measure of income received from wages and salaries, dividends and interest, rental income, and the like.

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