In economics indicators are used to get a picture of what is happening, and might happen in the future. Economists can then make more informed decisions and assessments. Four such metrics are the Institute for Supply Management Manufacturing and non-manufacturing indexes, government spending as percent of GDP and consumer spending. Since the economy is an important aspect of market performance, being aware of what these indicators are saying is important to medium and long-term investment performance if they are being looked at in that context.
ISM-NM Index
The services industry comprises 40-50 percent of the U.S. economy as measured by employment. This month Bloomberg reported a march decline in the Institute for Supply Management's index of non manufacturing companies due in part to rising fuel costs to 57.3. Historically speaking this number is actually quite high in terms of the the ISM-NM Index for the last 10 years, indicating a possible peak if past trends are any indicator.
Government expenditures
Government entitlements such as social security alone are equivalent to 14 percent of GDP according to the Heritage foundation. If government is such a large financial contributor to the economy, what happens when budget cuts take affect seems to contradict the optimistic economic affects of corporate growth?
Consumer spending
If consumer spending accounts for 70 percent of the economy, high unemployment doesn't help that much. However, if 80 percent of spenders account for only 7 percent of total U.S. wealth as suggested by the University of California Santa Cruz Sociology Department, then what's more important in terms of spending is the top 20 percent. This group does appear to be getting wealthier, however even the 19 percent of Americans who account for 50.3 percent of U.S. wealth have lost money via declines in the housing market. Even with rises in equity valuations, that wealth does not appear to have recovered indicating a loss of spending power.
Several more economic indicators exist. The Conference Board Leading Economic Indicator Index is a composition of such items. Assessing the largest indicators is one way to acquire a general forecast of where the economy might be heading, and is unlikely to be specific enough to evaluate the performance of individual businesses within the economy. For that a more refined analysis is needed.
The services industry comprises 40-50 percent of the U.S. economy as measured by employment. This month Bloomberg reported a march decline in the Institute for Supply Management's index of non manufacturing companies due in part to rising fuel costs to 57.3. Historically speaking this number is actually quite high in terms of the the ISM-NM Index for the last 10 years, indicating a possible peak if past trends are any indicator.
Government entitlements such as social security alone are equivalent to 14 percent of GDP according to the Heritage foundation. If government is such a large financial contributor to the economy, what happens when budget cuts take affect seems to contradict the optimistic economic affects of corporate growth?
Consumer spending
If consumer spending accounts for 70 percent of the economy, high unemployment doesn't help that much. However, if 80 percent of spenders account for only 7 percent of total U.S. wealth as suggested by the University of California Santa Cruz Sociology Department, then what's more important in terms of spending is the top 20 percent. This group does appear to be getting wealthier, however even the 19 percent of Americans who account for 50.3 percent of U.S. wealth have lost money via declines in the housing market. Even with rises in equity valuations, that wealth does not appear to have recovered indicating a loss of spending power.
Several more economic indicators exist. The Conference Board Leading Economic Indicator Index is a composition of such items. Assessing the largest indicators is one way to acquire a general forecast of where the economy might be heading, and is unlikely to be specific enough to evaluate the performance of individual businesses within the economy. For that a more refined analysis is needed.
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