At the end of last summer, I pulled into a gas station in which a sign over the posted gas prices read, “Swimsuit season is over; Krispy Kreme is here.” It was an unconventional yet palpable indicator that summer had ended.
Some signs require a little more technical interpretation, like the ones used to indicate whether our economy is advancing. There are many leading indicators that are considered the most redolent of how the economy is doing. Leading indicators present signs typically before the economy as a whole actually changes — and are, therefore, useful as only short-term projections.
[CLICK HERE to check out the latest batch of economic releases from the U.S. Bureau of Economic Analysis.]
[CLICK HERE to read the press release, “Bank Introduces New Measure of GDP,” from The Philadelphia Federal Reserve Bank, Nov. 4, 2013.]
The following are 10 leading economic indicators designed to help predict activity in the U.S. economy six to nine months in the future.
- Average weekly hours (manufacturing), an indicator for changes in unemployment
- Average weekly jobless claims for unemployment insurance, to indicate job losses
- Manufacturers’ new orders for consumer goods/materials, to indicate future revenue
- Vendor performance (the time it takes to deliver orders), an indicator of rising demand
- Manufacturers’ new orders for non-defense capital goods, an indicator of actual production
- Building permits for new private housing units
- The Standard & Poor’s 500 stock index — changes in stock prices reflect investor’s expectations for the future of the economy and interest rates.
- Money Supply (M2), measures deposits — an increase indicates expectations that inflation will rise, resulting in a decrease in bank lending and an increase in savings
- Interest rate spread (10-year Treasury vs. Federal Funds target), a predictor of a downturn in the economic cycle, particularly when the curve becomes inverted
- Index of consumer expectations for spending or tightening
[CLICK HERE to read the press release, “The Conference Board Leading Economic Index® (LEI) for the U.S. Increased in September ,” from The Conference Board, Nov. 6, 2013.]
Then again, there are less technical signs that the economy is improving, at least within our own households. Indicating that we have more disposable income on hand, perhaps we eat out more often, go a little pent-up crazy shopping at the local mall or spend a bit more money on vacation.
[CLICK HERE to read the article, “Eight Unconventional Indicators,” at WealthManagement.com, Oct. 29, 2013.]
[CLICK HERE to read the article, “The Container Store: The Next Big Economic Indicator?” at Marketplace.org, Nov. 1, 2013.]
And some indicators are more unorthodox than others, such as gamblers paying off their debts and the color trend for women’s nail polish.
CLICK HERE to read the article, “Q&A: Deadbeat gamblers as economic indicator?” at ThePhillyGodfather.com, Nov. 8, 2013.]
[CLICK HERE to read the article, “Fashion’s True Leading Economic Indicator” at Forbes.com, Oct. 6, 2013.]
However you track economic trends, one of the factors of financial success may be to recognize the signs for both prosperity and trouble brewing. Stay on top of the dynamics that may affect your job and income. Keep abreast of legislation that may impact your taxes, expenses and savings opportunities. And work with professionals who monitor the economic indicators and can help alert you to the signs of potential opportunities.
That’s where we come in. Please contact us if you need any help.
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