Economic Indicator Essay
The Leading Economic Indicators
There are two types of economic indicators namely the leading and lagging indicators used in economy. The leading indicators is our main focus since the indicators can be used in predication of future economic trends unlike lagging indicators which are identified after an economic pattern has occurred. There are a number of leading economic indicators which will be discussed. Therefore this paper focuses on discussing the leading economic indicators, identifying the most important indicator and giving reasons why the indicator is the most important.
Stock Market Economic Indicator
Most people would prefer to look at the stock market as the key economic indicator of a successful or failing economy. The stock prices depend on the profits companies are expected to earn thus the stock market can tell the economy’s direction if what the company will earn is very accurate (Yamarone, 87). For instance a strong market will indicate that the prices are way high which indicates the economy is prepared to thrive while a market which is not strong indicates decreased prices thus indicating the down fall of the economy. Writers who offer accounting assignment help at Edudorm essay writing service notes that, however, stocks market cannot be relied on as the only leading economic indicator since the earnings can sometimes be wrong thus giving inaccurate estimates and indications. Secondly the stock market can sometimes be manipulated by the government and other institutions therefore giving the wrong economic estimates. Due to these manipulations from the government one cannot rely on the stock markets so as to indentify the strength or down fall of the economy. Bubbles maybe created with use of stock market and end up giving inaccurate data regarding the direction of the economy. Thus stock market should not be relied on fully since it comes with flaws and if not well analyzed can give inaccurate information regarding the direction of the economy.
Manufacturing Activity Economic Indicator
Manufacturing activity is another key economic indicator in that the more a product is demanded the more the rate of manufacture and thus indicating strong economic standards. The manufacturing activity got an influence on the gross domestic product (GDP) indicating that the higher the goods are sold the higher the chances of the economy regaining strong and healthy(Yamarone, 112). Manufacturing activity increases chances of employment opportunities since more people will be employed in the manufacturing industries which will improve the living conditions and in turn boost the economy positively. However manufacturing activity can sometimes be inaccurate since manufacture of goods and services at times is not influenced by the customers. Experts who offer managerial accounting assignment help at Edudorm essay writing service indicates that goods can be manufactured while they lie in the stores and incur the other costs of ensuring they are safe in the stores. Thus manufacturing data and sales data should be considered and thus if both are rising then conclusions can be made that the economy is strong and healthy but the levels of inventory should be considered as well.
Levels of Inventory Economic Indicator
Low levels of demand and high demand levels of inventory are the two major indications reflected by high inventory levels. Increased consumption levels indicate high demands of inventories which in turn will show a positive rise in the economic standards (Furgang, 34). An increase in the activity of consumers indicates that those businesses with high levels of inventory will end up getting large profits which in turn shows a positive growth of the economy. However the high inventory can also indicate that the demand for products is less than what the companies are producing. This therefore shows that companies are incurring more costs in production than the profits they are gaining and that retailers are suffering since they are not making huge profits which in turn leads to economic stains and reflects the economy’s growth is negative.
Retail Sales
The retail sales goes hand in hand with the manufacturing activity and the levels of inventory indicating that the more the rates of sales the more companies and retailers make profits and thus impact on the economy positively. High retail sales indicate a positive rise in the GDP and thus definitely show that the economic is growing in a healthy manner (Furgang, 34). Authors who offer financial accounting assignment help at Edudorm essay writing service points that increase in sales indicates more employment levels and more manufacturing activity which means that consumers will use less money and thus the standards of living will improve which in turn indicates economic growth. However this economic indicator too has short comings since no exact number of purchasers is given thus it can be inaccurate to use it as the main economic indicator. Generally, more retail sales indictors a positive growth in the economy.
Building Permits Economic Indicator
A high number of the construction permits indicates a positive growth in the state of the economy (Griffis, 76). More construction rates indicate increase in employment opportunities and high demand of construction materials which in turn shows improvement in the standards of living and growth of the economy. However if the numbers of houses constructed exceed the people willing to buy some loses may be incurred since the prices will have to be reduced so that people can buy the old houses as new ones will have been constructed already.
Housing Market Economic Indicator
Decrease in the house prices, show that the houses are many than the people and that people cannot afford those houses indicating that the living conditions are not good (Griffis, 96). Decrease in house prices will reduce the rate of houses being constructed and thus people will lose jobs. Tutors who offer college assignment help at Edudorm essay writing service acknowledges that the taxes on housing will decline thus the government will suffer since its resources will now be limited. Thus if the prices of housing declines the economy will be affected negatively since not only the owners suffer but the government as well since it rely on hosing taxes as its source of finances.
Best Economic Indicator
I would choose retail sales as the main important economic indicator since without sales the economy cannot grow. For instance all the other indicators depend on the levels of sales being made. When looking at the manufacturing activity, the goods manufactured must be sold and from the sales of the goods companies make profits which in turn indicate a positive rise on the economy. Without sales, no profits can be made and thus if consumers are not buying the goods being manufactured, the goods cannot continue being manufacture. Thus sales are the most important indicators of economic growth since the higher the sales the higher the employment rates and thus rejecting a positive growth in the economic state. In addition, buildings cannot be constructed is consumers are not purchasing them since it will incur losses on the companies and individuals constructing the houses. Therefore it is right to support my choice that retail sales are the key economic indicators of telling whether an economy is growing positively or negatively.
Work Cited
Yamarone, Richard. The Trader’s Guide to Key Economic Indicators. Hoboken, N.J: Wiley, 2012. Print.
Furgang, Kathy. Understanding Economic Indicators: Predicting Future Trends in the Economy. New York: Rosen Pub, 2012. Print.
Griffis, Michael. Economic Indicators for Dummies. Hoboken, N.J: John Wiley & Sons, 2013. Internet resource.
