What Are Key Economic Indicators?

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In economics, there is a wide variety of statistics, equations and data. Among these however, there are key economic indicators which have a particularly high significance in determining the country's overall growth and the livelihood of consumers and businesses. Most government and business decisions are based on key economic indicators; these statistics can determine overall economic changes in a country.

Construction Spending/Sales

  • Construction and real estate make up one of the most significant spending areas in an economy. These are representative of overall spending and investment in the country. A high number here indicates that consumers are making long term investments --- signifying continuous growth --- and businesses are creating supply for the overall market.

Consumer Confidence

  • Consumer confidence is the index that represents the willingness of customers to buy goods and services. This is a vital economic indicator because the economic cycle starts with consumer spending and demand. This number is created by an index of overall spending and savings in the economy. A high number here means that businesses will be more willing to take risks in spending, create more supply and hire more people.

Consumer Price Index/Inflation

  • The consumer price index is the average price level of consumer goods and services. This is based on a weighted average of a "market basket" of goods --- a list of goods that are consistently in demand. These products range from commodities such as fruits to basic materials like clothes. The CPI is directly tied to inflation as well; an increase in CPI signifies an overall price increase. If real earnings did not increase just as much, the difference would equal inflation.

Gross Domestic Product

  • Gross domestic product is a central statistic used in gauging most macro-economies. The GDP is the overall revenue of the entire country, including revenue made from taxes, consumer spending and direct foreign investment. An increase in GDP signifies overall economic growth; a significant decrease, however, may force the government to enact fiscal policies to control spending.

Trade Balance

  • A part of GDP, the trade balance is the difference between import spending and export sales. A negative trade balance means the country is importing more than it is exporting and vice versa. Being more dependent on exports, imports or a balance of both is neither good nor bad in itself; it depends on the economic goals and specialization of the country. For example, Japan would aim for having a positive trade balance due to its traditionally high export activity.

Unemployment Rate

  • The unemployment rate is the overall percentage of reported unemployed people in the country. This is taken from a weighted average of reports from all unemployment offices in each state. However, this indicator is limited in that it can't measure true unemployment; it can only count the people who apply for unemployment benefits. This economic indicator is notable in that it is tied to many other indicators; for example, a high unemployment rate implies low consumer confidence, low construction spending and an overall decrease in GDP growth.

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