Boston University Undergraduate Economics

Association

MAG – Economic Indicator Briefing

What is an economic indicator?

•  A statistic about an economic activity that allows analysis of economic performances and predictions of future performance

•  Published by various governmental agencies •  National Bureau of Economic Research •  Bureau of Labor Statistics •  United States Census Bureau •  Bureau of Economic Analysis

Types of indicators

•  Leading Indicators •  Indicators that usually change before the economy as a whole

changes •  Ex: Building permits, manufacturer’s new orders for consumer

goods

•  Lagging Indicators •  Indicators that usually change after the economy as a whole

changes •  Ex: Change in labor cost per unit of output

•  Coincident Indicators •  Indicators that usually change approximately at the same time

as the whole economy •  Ex: Gross Domestic Product (GDP), nonfarm payroll employment

Gross Domestic Product (GDP)

•  Defined by OECD: •  an aggregate measure of production equal to the sum of the

gross values added of all resident, institutional units engaged in production (plus any taxes, and minus any subsidies, on products not included in the value of their outputs)

•  Released by the Bureau of Economic Analysis •  Updated quarterly

Consumer Price Index (CPI)

•  Defined by Bureau of Labor Statistics: •  The Consumer Price Indexes (CPI) program produces monthly

data on changes in the prices paid by urban consumers for a representative basket of goods and services.

Unemployment Rate

•  Defined by Bureau of Labor Statistics: •  Persons are classified as unemployed if they do not have a job,

have actively looked for work in the prior 4 weeks, and are currently available for work. Persons who were not working and were waiting to be recalled to a job from which they had been temporarily laid off are also included as unemployed.

•  Updated monthly

Housing Indicators

•  Various housing indices = look at home building, housing prices •  Housing market is a big indicator of economic health •  Ex: Case Shiller Housing Price Index, Building permits

How to analyze indicators

•  Understand assumptions and methodology of indicator

•  Is it leading, lagging, coincident?

•  Understand the time frame for the indicator

•  Why is this important to the economy?