ECONOMIC INDICATOR

Macroeconomic indicators are the statistics that shows the current

status of the economy of any country.
Economic indicators are use for analysis of economic performance
and predictions for the future performances. One application of
economic indicators is the study of business cycles. Economic
indicators include various index, earnings reports, and economic
summaries.

BUSINESS CYCLE:
Business cycle also known as an Economic cycle. It is the
downward
and
upward
movement
of gross
domestic
product (GDP) around its long-term growth trend. These
fluctuations typically involve shifts over time between periods of
relatively rapid economic growth (expansions ) and periods of
relative stagnation or decline (contractions or recessions).
Business cycles are usually measured by considering the growth
rate of real gross domestic product and these fluctuations in
economic activity can prove unpredictable.

MAIN

INDICATORS OF ECONOMY:
Traders are always trying to understand the factors that cause the
market to rise and fall. The truth is that there is a number of
factors influence in the economy. Millions of investors make
decisions that impact the market every day.
The main indicators of economy are;

GDP
Inflation
Electrical production
Employment

GROSS
(GDP):

1.

DOMESTIC

PRODUCT

Gross domestic product (GDP) is a measure of the size of an

economy. It is defined as an aggregate measure of production
equal to the sum of the gross values added of all resident,
institutional units engaged in production.

COMPONENTS OF GDP:
Economist divides GDP into four categories;
1. Consumption expenditure: Purchases of newly produced
goods and services by households.
2. Private investment expenditure: Purchase of newly
produced goods and services by firms.
3. Govt. purchases: Purchase of newly produced goods and
services by local, state and federal governments.
4. Net exports: Net purchases by the foreign sector (domestic
exports minus domestic imports)

GDP EQUATION:
Y=C+I+G+
Where,
Y= GDP
C= Consumption
I= Investment
G= Govt. purchases
NX= Net exports

STRENGTHS OF GDP:

GDP provides a better analysis or measure of economy

activity through its growth rate and changes in an economy than
any other existing measure.

GDP helps policy-makers and analysts to easily guide, adjust

and implement economic policy.

GDP provides the government and business useful

information to adjust in different kinds of contingency problems
like recession and depression.

WEAKNESSES OF GDP:

GDP does not include non-market activities. These activities

are based on production and consumption that occur outside the
market economy that does not have a price attached like
volunteer work and the illegal drug trade.

GDP does not include domestic household products

GDP does not consider how the wealth of a nation is

distributed equally.

2.

INFLATION:

Inflation is defined as a persistent increase in the general level of

prices for goods and services.
As inflation rises, every rupee you own buys a smaller percentage
of a good or services
There are various types or measures of inflation e.g. CPI, SPI,
WPI, GDP deflator etc.
1. CPI: measures the prices at retail level in the country.
2. SPI: is computed to assets the price movement of essential
commodities at short interval of time to review the price
situation in the country.

3. WPI: Measures the general price level in the whole sale

market.
4. GDP DEFLATOR: Measures the prices of all goods and
services produced domestically.

Pros of inflation
Deflation - As prices deflate, people delay purchases with the
hope that prices will fall further.
Adjustment of relative prices- A moderate inflation rate can
enable countries to adjust relative prices and regain
competitiveness.
Growth boost- At very low inflation rates, countries may
suffer from recession. This is why some countries target a
moderate rate of inflation which will push the circulation of
money.

Cons of inflation
Reduces investment Due to future uncertainties, people fear
investing money and then losing it later. This in turn reduces
investments. In case of lower inflation rates, firms are willing to
take a risk and invest, which improves stability.
Reduction in value of savings When the inflation rate is
higher than the interest rates, people with savings suffer the
most since they do not receive their deserved interest.
Uncompetitive economy High inflation rates can make a
countys economy uncompetitive. It reduces exports, thereby
leading to a current account deficit, and lower economic
growth.

 Economic boom and bust While high inflation rates can lead
to an economic boom, bringing down the rates can then lead to
sudden recession and bust the economy.

3.

ELECTRICAL PRODUCTION:

Energy is the main source of development of any country and

nowadays it is a relatively modest share of GDP in most countries.
However, the energy sectors impact on the economy is greater
than the sum of its parts. Most importantly, energy is an input to
nearly every good and service in the economy. For this reason,
stable and reasonable energy prices are beneficial to sustaining
and expanding economic growth.
Countries with fewer natural resources are also focusing on the
energy sector as a potential driver of economic growth. Steady
and reliable energy supplies are crucial to growth in developing
and emerging economies.

AFFECTS OF ENERGY IN ECONOMY:

Energy sector is the main source of growth for any nation and
without proper management economy growth is becoming
stagnant.
Raising the cost of production, subsequently leads to
increase in the prices of finished goods.
In local market, consumers have to bear it.
In the international market price competitiveness reduces
exports.

4. Employment

Indicators:

Employment indicators reflect the overall health of an economy or

business cycle. In order to understand how an economy is
functioning, it is important to know how many jobs are being
created or destructed, what percentage of the work force is
actively working, and how many new people are claiming
unemployment.

UNEMPLOYMENT RATE:
The unemployment rate is an important economic indicator for a
community. It is low during good economic times and high during
recessions.
Unemployment rate = [(no. of people unemployed) / (labor
force)]* 100

Individual level:
Unemployment reduces household income.
Limited access to health insurance.
Increase psychological stress.

Community level:
Increase joblessness.
Decrease in employment opportunities.

 Places more demand on community services.

THREE CATEGORIES FOR UNEMPLOYED PERSON:

Without work but has made specific efforts to find a job
within the previous four weeks.
Waiting to be called back to a job from which he or she has

been laid off.

Waiting to start a new job within 30 days.