Apart from industry and company, the state of the overall economy of the United States can provide valuable insights to investors that help them with their decision making. For instance, when considering whether to invest in a company that relies on consumer spending, it would be prudent to note if the economy faces a recession. Kavan Choksi, a reputed finance and business expert, mentions that economic indicators provide information about an economy, and help people to understand if it is expanding or contracting.
Kavan Choksi underlines a few of the key economic indicators of United States
Individuals who measure economic activity, as well as predict future trajectories depend on the analysis of important pieces of macroeconomic data. These data quantify various aspects of an economy, and measure everything from economic growth to changes in prices to unemployment. GDP or gross domestic product essentially is considered to be the key economic indicator of any country, including the U.S. GDP of the United States basically provides the overall value of the services and goods produced by the economy and indicate whether it is growing or slowing. Department of Commerce goes through the quarterly change in GDP and breaks down the activity into changes in consumer spending, government spending, business investment and the impact of foreign trade. The government firstly puts a preliminary first estimate, updates it with a second reading, and ultimately delivers a third and final report after getting more input.
Employment Figures are the second most important economic indicator of United States. The Department of Labor puts a monthly release on employment that includes the number of jobs created the previous month by the government, the private sector and some specific industries, along with the national unemployment rate. Low unemployment can point to a robust economy, as well as predict rising inflation.
Industrial Production and consumer spending would be the next on the list of vital economic indicators of the U.S. Industrial production basically is the measure of output of manufacturing-based industries, which includes the sectors producing goods for consumers and businesses. This monthly release from the Federal Reserve reports on capacity utilization in the factory sector as well. Consumer Spending, on the other hand, accounts for two-thirds of the U.S. gross domestic product and is considered to be a good gauge of consumer health. The monthly release published by the Department of Commerce on personal income and outlays provides data on consumer spending. It also offers information on inflation with the help of a price index that reflects changes in how much consumers have to spend to buy specific items. Inflation refers to the general price level rise of goods and services in an economy. Kavan Choksi mentions that too high inflation may indicate that an economy is overheating, while low inflation can be an indicator of economic recession.
Depending on the chosen set of services and goods used, diverse types of inflation values are calculated and tracked as inflation indexes. The Wholesale Price Index (WPI) and Consumer Price Index (CPI) are the most commonly used inflation indexes.