What Are Key Economic Indicators?


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.

Related Searches


Promoted By Zergnet



You May Also Like

Related Searches

Check It Out

Can You Take Advantage Of Student Loan Forgiveness?

Is DIY in your DNA? Become part of our maker community.
Submit Your Work!