This lesson printed from:
Posted March 12, 1999
Author: Steve Reff
Posted: March 12, 1999
Updated: January 8, 2008
How do economists make their forecasts about the U.S. economy? What are the economic indicators that help forecast economic activity and business cycles? In this lesson you will be able to retrieve up-to-date, key economic statistics which will provide valuable hints about the state of the future economy.
- Identify sources for macroeconomic data.
- Interpret data.
- Describe the present state of the economy using current data.
- Use data to predict the state of the economy one year from now.
How do economists make their forecasts about the U.S. economy? What are the economic indicators that help forecast economic activity and business cycles?
In this lesson you will be able to retrieve up-to-date, key economic statistics which will provide valuable hints about the state of the future economy. Economic Indicators are divided into three categories:
A. Leading Indicators - anticipate a business cycle by tending to turn down before the down cycle begins and to turn up before the expansionary cycle begins. These Primary Leading Economic Indicators are as follows:
- M1 money supply
- M2 money supply
- Change in sensitive material prices
- New orders for consumer goods and materials
- Contracts for orders for plant and equipment
- New building permits for private housing units
- Changes in business inventories
- Vendor performance
- Common stock prices
- Length of the average work week
- Initial claims for unemployment insurance
- Change in consumer debt
B. Coincident Indicators - run in sync with the business cycle. These Coincident Indicators are as follows:
- Number of employees on nonagricultural payrolls
- Industrial production
- Personal income minus transfer payments
- Manufacturing and trade sales volume
- Civilian employment to population ratio
- Gross domestic product
C. Lagging Indicators - follow changes in the business cycle. These Primary Lagging Indicators are as follows:
- Average duration of unemployment
- Manufacturing and trade inventories
- Commercial loans
- Ratio of consumer debt to personal income
- Change in labor cost per unit of output, manufacturing
- Short-term interest rates
The major source of the above indices is The Conference Board: www.conference-board.org/data/bci.cfm
Information is a scarce resource. You will become better informed about current economic information through this lesson.
Try this scavenger hunt activity using these four data sources:
Economy at a Glance
Gross Domestic Product (current and past figures)
www.research.stlouisfed.org/redirect.php?url=/fred//data/gdp.html and www.bea.gov/national/index.htm#gdp
The Briefing Room: Official Statements
Answer the following questions:
Is gasoline cheaper today than it was in 1959? [No, gasoline is not cheaper today than it was in 1959.]
What was the unemployment rate in February 1999? [The unemployment rate in February 1999 was 4.4%.]
What is the outstanding public debt as of today? Go to www.brillig.com/debt_clock/
to find out. [The answers will vary.]
To whom is outstanding public debt owed?
[Foreign and domestic bondholders (individuals and institutions), and the Federal Reserve. ]
What is the trend in the personal saving rate? [As of the latest White House briefing, it is increasing. However, be aware that this answer changes with time.]
How much of a problem is inflation so far in 2004? [Inflation is not much of a problem so far in 2004; it's at 2.9%.]
- By how much did the Gross Domestic Product change in the fourth quarter of 2003? [The Gross Domestic Product changed +4.1% in the fourth quarter of 2003.]
Write an essay describing the current state of the economy and predict the state of the economy one year from now. Be sure to include statistics from the web sites above.
For quick access to current economic data, be sure to visit the DataLinks section of this web site.