Macro-Economics Indicators Essay Sample
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Macro-Economics Indicators Essay Sample
Macroeconomic indicator is a statistics about the economy. Economic indicators allow analysis of economic performance and predictions of future performance. One application of economic indicators is the study of business cycles. Economic indicators include various indices, earnings reports, and economic summaries. Examples: unemployment rate, quits rate, housing starts, Consumer Price Index (a measure for inflation), Consumer Leverage Ratio, industrial production, bankruptcies, Gross Domestic Product, broadband internet penetration, retail sales, stock market prices, money supply changes. United States Census Bureau and United States Bureau of Economic Analysis are producers of economic indicators. Classification of macroeconomic indicators n the basis of time:- On the basis of time economic indicators can be classified into three groups according to their usual timing in relation to the business cycle, those are as follows. (1) leading indicators,
(2) lagging indicators,
(3) and coincident indicators.
(1)Leading indicators:-A short term predictor of economy.
Leading indicators are those indicators that usually changes before the economy as a whole change. They are therefore useful as short-term predictors of the economy. Examples of leading indicators:-
(a) Stock market returns.
(b) the index of consumer expectations.
(c) building permits,
(d) and the money supply.
The 10 Components of Leading Indicators:-
1. Average weekly hours (manufacturing) — Adjustments to the working hours of existing employees are usually made in advance of new hires or layoffs, which is why the measure of average weekly hours is a leading indicator for changes in unemployment. 2. Average weekly jobless claims for unemployment insurance — The CB reverses the value of this component from positive to negative because a positive reading indicates a loss in jobs. The initial jobless-claims data is more sensitive to business conditions than other measures of unemployment. 3. Manufacturers’ new orders for consumer goods/materials — this component is considered a leading indicator because increases in new orders for consumer goods and materials usually mean positive changes in actual production. The new orders decrease inventory and contribute to unfilled orders, a precursor to future revenue.
4. Vendor performance (slower deliveries diffusion index) — This component measures the time it takes to deliver orders to industrial companies. Vendor performance leads the business cycle because an increase in delivery time can indicate rising demand for manufacturing supplies. Vendor performance is measured by a monthly survey from the National Association of Purchasing Managers (NAPM). This diffusion index measures one-half of the respondents reporting no change and all respondents reporting slower deliveries. 5. Manufacturers’ new orders for non-defence capital goods — As stated above, new orders lead the business cycle because increases in orders usually mean positive changes in actual production and perhaps rising demand. This measure is the producer’s counterpart of new orders for consumer goods/materials component. 6. Building permits for new private housing units.
7. The Standard & Poor’s 500 stock index — The S&P 500 is considered a leading indicator because changes in stock prices reflect investor’s expectations for the future of the economy and interest rates. 8. Money Supply (M2) — The money supply measures demand deposits, traveller’s checks, savings deposits, currency, money market accounts, and small-denomination time deposits. Here, M2 is adjusted for inflation by means of the deflator published by the federal government in the GDP report. Bank lending, a factor contributing to account deposits, usually declines when inflation increases faster than the money supply, which can make economic expansion more difficult.
Thus, an increase in demand deposits will indicate expectations that inflation will rise, resulting in a decrease in bank lending and an increase in savings. 9. Interest rate spread (10-year Treasury vs. Federal Funds target) — The interest rate spread is often referred to as the yield curve and implies the expected direction of short-, medium- and long-term interest rates. Changes in the yield curve have been the most accurate predictors of downturns in the economic cycle. This is particularly true when the curve becomes inverted, that is, when the longer-term returns are expected to be less than the short rates. 10. Index of consumer expectations — This is the only component of the leading indicators that is based solely on expectations. This component leads the business cycle because consumer expectations can indicate future consumer spending or tightening. The data for this component comes from the University of Michigan’s Survey Research Centre, and is released once a month.
Lagging indicators are indicators that usually change after the economy as a whole does.
Typically the lag is a few quarters of a year. Examples of lagging indicators:-
The components are:-
* The average duration of unemployment (inverted)
* The value of outstanding commercial and industrial loans
* The change in the Consumer Price Index for services
* The change in labour cost per unit of output
* The ratio of manufacturing and trade inventories to sales
* The ratio of consumer credit outstanding to personal income
* The average prime rate charged by banks.
(3)Coincident indicators:-provides current information of economy. Coincident indicators change at approximately the same time as the whole economy, thereby providing information about the current state of the economy. Examples of coincident indicators:-
(a) Gross Domestic Product,
(b) industrial production,
(c) personal income
(d) and retail sales.
Classification of macroeconomic indicators n the basis of direction:-There are also three terms that describe an economic indicator’s direction relative to the direction of the general economy: (1) Procyclic:-It moves in the same direction as the general economy: they increase when the economy is doing well,decrease when it is doing bad. Example: Gross domestic product (GDP) is a procyclic indicator. (2)Countercyclic:-It moves in the opposite direction to the general economy. Example:The unemployment rate is countercyclic. (3)Acyclic:- indicators are those with little or no correlation to the business cycle: they may rise or fall when the general economy is doing well, and may rise or fall when it is not doing well. Example:Business cycle.
INDIA AT A GLANCE:-
Gross Domestic Product during 2010-11: US$ 1518.2 billion (Rs 73.1 trillion)
Per capita income during 2010-11: US$ 1146.8 (Rs 54,835)
Forex Reserves (as on January 20,2012): US$ 293.25 billion
Exports (November 2011): US$ 22.3 billion
Exports (April-November 2011-12): US$ 192.7 billion
Imports (November 2011): US$ 35.9 billion
Imports (April-November 2011-12): US$ 309.5 billion
Amount of FDI inflows (for November 2011): US$ 2.54 billion Amount of FDI inflows (from April 2011 to November 2011): US$ 22.83 billion Cumulative amount of FDI equity inflows (from April 2000 to November 2011): US$ 152.55 billion Sectors attracting highest FDI inflows: Services Sector (21 per cent), Telecommunications (8 per cent), Computer Software & Hardware (7 per cent),Housing & Real Estate (7 per cent),Construction Activities (Including Roads & Highways) (7 per cent), Power (5 per cent),Automobile Industry (4 per cent),Metallurgical Industries (4 per cent), Drugs & Pharmaceuticals (3 per cent), Petroleum & Natural Gas (2 per cent). Top Investing Countries: Mauritius (41 per cent), Singapore (10 per cent), U.S.A (7 per cent), U.K (6 per cent), Japan (5 per cent), Netherlands (4 per cent),Cyprus (4 per cent), Germany (3 per cent), France (2 per cent), U.A.E (1 per cent).
Area : 3.3 Million sq. km
Location: The Indian peninsula is separated from mainland Asia by the Himalayas. The Country is surrounded by the Bay of Bengal in the east, the Arabian Sea in the west, and the Indian Ocean to the south. India occupies a major portion of the south Asian subcontinent. Geographic Coordinates: Lying entirely in the Northern Hemisphere, the Country extends between 8° 4′ and 37° 6′ latitudes north of the Equator, and 68°7′ and 97°25′ longitudes east of it. Indian Standard Time: GMT + 05:30
Telephone Country Code: +91
Capital: New Delhi
Border Countries: Afghanistan and Pakistan to the north-west; China, Bhutan and Nepal to the north; Myanmar to the east; and Bangladesh to the east of West Bengal. Sri Lanka is separated from India by a narrow channel of sea, formed by Palk Strait and the Gulf of Mannar. Coastline : 7517 km encompassing the mainland, Lakshadweep Islands, and the Andaman & Nicobar Islands. Climate: The climate of India can broadly be classified as a tropical monsoon one. But, in spite of much of the northern part of India lying beyond the tropical zone, the entire country has a tropical climate marked by relatively high temperatures and dry winters. There are four seasons – winter (December-February), (ii) summer (March-June), (iii) south-west monsoon season (June-September), and (iv) post monsoon season (October- November) Terrain: The mainland comprises of four regions, namely the great mountain zone, plains of the Ganga and the Indus, the desert region, and the southern peninsula. Natural Resources: Coal, iron ore, manganese ore, mica, bauxite, petroleum, titanium ore, chromite, natural gas, magnesite, limestone, arable land, dolomite, barytes, kaolin, gypsum, apatite, phosphorite, steatite, fluorite, etc. Political Profile :-
Country Name: Republic of India ; Bharat Ganrajya
Government Type: Democratic Republic with a Parliamentary system of Government. Administrative Divisions : 28 States and 7 Union Territories. Constitution: The Constitution of India came into force on 26th January 1950. The Constitution of India is the fountain source of the legal system in the Country. Executive Branch: The President of India is the Head of State, while the Prime Minister is the Head of the Government and runs office with the support of the Council of Ministers who forms the Cabinet. Legislative Branch: The Federal Legislature comprises of the Lok Sabha (House of the People) and the Rajya Sabha (Council of States) forming both the Houses of the Parliament. Judicial Branch: The Supreme Court of India is the apex body of the Indian legal system, followed by other High Courts and subordinate Courts. National Days:
* 26 th January (Republic Day)
* 15 th August (Independence Day)
* 2 nd October (Gandhi Jayanti; Mahatma Gandhi’s Birthday)
Population (Census 2011): 1210.19 Million
Males: 623.7 Million,
Females: 586.5 Million
Density of Population (Census 2011) : 382 Persons (Per Square Kilometer) Literacy Rate (Census 2011): 74.04 Percent
Males: 31.98 Percent,
Females: 49.1 Percent