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Economic Indicator

What is an 'Economic Indicator'

An economic indicator is a piece of economic data, usually of macroeconomic scale, that is used by analysts to interpret current or future investment possibilities or to judge the overall health of an economy. Economic indicators can be anything the investor chooses, but specific pieces of data released by government and non-profit organizations have become widely followed. Such indicators include but aren't limited to: the consumer price index (CPI), gross domestic product (GDP), unemployment figures and the price of crude oil.

Explaining 'Economic Indicator'

Economic indicators are key statistics that indicate the direction of an economy. While the indicators can be numerous, there are three broad categories of economic indicators: leading indicators, coincident indicators and lagging indicators.

Problems With Economic Indicators

An economic indicator is only useful if one interprets it correctly. History has shown strong correlations between economic growth, as measured by GDP, and corporate profit growth. However, determining whether a specific company may grow its earnings based on one indicator of GDP is nearly impossible. Indicators provide signs along the road, but the best investors utilize many economic indicators, combining them to glean insight into looking patterns and verifications within multiple sets of data.

An Example of Economic Indicators

Economic indicators are often combined to produce a composite view of economic performance. For example, the state of Florida, on July 11, 2016, released an analysis on its economic indicators for the month of May 2016. The analysis consisted of its CPI, employment levels, unemployment insurance, unemployment rate, real estate and housing price index.


Further Reading


The variable financial indicator IRR and the constant economic indicator NPV
www.tandfonline.com [PDF]
The IRR (internal rate of return) and the NPV (net present value) are the two most common and important indicators in investment decisions. These two indicators, however, have intrinsic differences between one another. The IRR is a financial indicator and the NPV an …

Financial deepening and economic development of Nigeria: An empirical investigationFinancial deepening and economic development of Nigeria: An empirical investigation
papers.ssrn.com [PDF]
The IRR (internal rate of return) and the NPV (net present value) are the two most common and important indicators in investment decisions. These two indicators, however, have intrinsic differences between one another. The IRR is a financial indicator and the NPV an …

Finance and growth: Schumpeter might be rightFinance and growth: Schumpeter might be right
academic.oup.com [PDF]
The IRR (internal rate of return) and the NPV (net present value) are the two most common and important indicators in investment decisions. These two indicators, however, have intrinsic differences between one another. The IRR is a financial indicator and the NPV an …

Financial sector development and economic growth: The South-Asian experienceFinancial sector development and economic growth: The South-Asian experience
www.sciencedirect.com [PDF]
The IRR (internal rate of return) and the NPV (net present value) are the two most common and important indicators in investment decisions. These two indicators, however, have intrinsic differences between one another. The IRR is a financial indicator and the NPV an …

The internal rate of return (IRR) as a financial indicatorThe internal rate of return (IRR) as a financial indicator
www.tandfonline.com [PDF]
The IRR (internal rate of return) and the NPV (net present value) are the two most common and important indicators in investment decisions. These two indicators, however, have intrinsic differences between one another. The IRR is a financial indicator and the NPV an …

Does financial development 'lead'economic growth? A vector auto-regression appraisalDoes financial development 'lead'economic growth? A vector auto-regression appraisal
www.tandfonline.com [PDF]
The IRR (internal rate of return) and the NPV (net present value) are the two most common and important indicators in investment decisions. These two indicators, however, have intrinsic differences between one another. The IRR is a financial indicator and the NPV an …

Financial intermediaries and monetary economicsFinancial intermediaries and monetary economics
www.sciencedirect.com [PDF]
The IRR (internal rate of return) and the NPV (net present value) are the two most common and important indicators in investment decisions. These two indicators, however, have intrinsic differences between one another. The IRR is a financial indicator and the NPV an …

Momentum and contrarian profits corresponding to the coincident economic indicator on the Taiwan stock marketMomentum and contrarian profits corresponding to the coincident economic indicator on the Taiwan stock market
www.tandfonline.com [PDF]
The IRR (internal rate of return) and the NPV (net present value) are the two most common and important indicators in investment decisions. These two indicators, however, have intrinsic differences between one another. The IRR is a financial indicator and the NPV an …

Does financial development cause economic growth? Time-series evidence from 16 countriesDoes financial development cause economic growth? Time-series evidence from 16 countries
www.sciencedirect.com [PDF]
The IRR (internal rate of return) and the NPV (net present value) are the two most common and important indicators in investment decisions. These two indicators, however, have intrinsic differences between one another. The IRR is a financial indicator and the NPV an …



Q&A About Economic Indicator


How do you determine if an indicator is useful?

You must interpret it correctly.

What does history show about GDP and corporate profit growth?

There has been a strong correlation between GDP and corporate profit growth.

Can you combine multiple indicators to get insight into looking patterns and verifications within multiple sets of data?

Yes, this can be done by combining them together to produce a composite view of economic performance.

What does the consumer price index (CPI) measure?

The CPI measures the prices of goods and services in a given area over time.

Which state released an analysis on its economic indicators for May 216 ?

Florida released an analysis on its economic indicators for May 216 .

Is it possible to determine whether a specific company will grow its earnings based on one indicator of GDP?

No, it isn't possible because there are many other factors that affect earnings growth besides just one indicator of GDP.

What is an economic indicator?

An economic indicator is a piece of economic data that can be used to interpret current or future investment possibilities.

What did the analysis consist of ?

The analysis consisted of CPI , employment levels, unemployment insurance , unemployment rate , real estate and housing price index .

Are there different types of indicators?

Yes, there are different types.

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