Key Economic Indicators Part 1

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  • Measure: Total employment. Employees and self employed
  • Significance: Indicates total current output potential. Highly cyclical, when demand increases employers tend to increase hours rather than new employment and vice versa. Watch hours and overtime for early signals.


  • Measures: People out of work buy ready and able to work
  • Significance: Indicates spare labor capacity (wasted resources). Highly cyclical, there may be a natural rate of unemployment. Companies can hire up to the point of the natural rate of unemployment. At that point demand breeds inflation.

Personal income, disposable income

  • Measures: Personal sector total income and income after tax
  • Significance: Basis for consumption and savings. Personal consumption accounts for between one half and two thirds of GDP. Look for sustainable growth on real incomes – Too rapid and it becomes inflationary.

Consumer and personal expenditure, private consumption

  • Measures: Spending by persons
  • Significance: Key component for GDP. Look for real percentage to change. If spending grows 6% and prices rise 4% then spending has only risen 2% in real terms. Change in spending on durable goods can be an early signal.

Consumer confidence

  • Measures: Consumers perception of their economic well being
  • Significance: Determines short term spending/borrowing/savings plans. A leading indicator, the more confident consumers are the more likely they are to spend money, which boosts consumer spending and economic output.


  • Measures: Stocks held by producers and distributors.
  • Significance: Indicates demand pressures; potential sales. Look at the stocks sales ratio: If ratios are higher than normal production and imports will be cut unless demand increases. If the ratios are lower production and imports should rise unless demand falls.

Business conditions; Indices and surveys

  • Measures: Anecdotal evidence of business climate
  • Significance: Valuable early warning of changes in the economic cycle. Provides valuable evidence of perceptions and expectations relating to business conditions.

Industrial and manufacturing production

  • Measures: value added output of mines and manufacturing companies
  • Significance: Indicator of industrial activity. Industrial production as a whole is broadly indicative of the state of the economic cycle. The output of industries producing capital goods and consumer durables tends to be squeezed most during a down turn.

Capacity use and utilization

  • Measures: Extent to which plant and machinery is in use
  • Significance: Indicator of output and inflationary pressures. Strong economic growth with high capacity use suggests inflationary pressures. However, if demand is expected to remain high and interest rates are low, producers may invest in new plant and machinery.

Manufacturing orders

  • Measures: New orders received by manufacturing companies
  • Significance: Indicates output in the near term. Buoyant orders indicate upward pressure on employment and output in the short term. It may suggest a rise in inflation if unemployment is already low, capacity use is high or inventories are low.

Motor vehicles

  • Measures: Activity involving cars and trucks
  • Significance: Indicates manufacturing production as well as consumer demand. Vehicle sales are a reasonable leading indicator, figures for cars are suggestive of consumption; vans and trucks are indicative of investment

Construction orders and output

  • Measures: Activity in the construction sector
  • Significance: Indicates new investment and future output. Construction work is highly seasonal. Construction activity is sensitive to expectations of future demand and to interest rates. Orders signal demand for building materials and labor over the coming months.