Ten Key US Economic Indicators, June 2016

If forecasters were hunters, then the economy would be their biggest yet most elusive of prey. Forecasters can track it for months or even years, get to know all its quirks and habits, listen carefully to its every footfall and yet still fail to predict when it’s going to charge like a bull or hibernate like a bear.

Forecasters use statistical models to make their economic forecasts, but what variables (aka, indicators) do they use in those models? There are thousands of possibilities, of course, but below are ten U.S. economic indicators worth tracking on a regular basis:

Gross Domestic Product (GDP)

Definition: GDP is the monetary metric indicating the value of all final good and services produced in a given period of time. It’s widely used to as a stand-in for a nation’s or region’s overall economic performance.

Recent Data Point for GDP

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Up 0.8 in first quarter of 2016

Graph of Recent GDP Trends

PERCENT CHANGE FROM PRECEDING QUARTERLY PERIOD IN GDP

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Consumer Price Index (CPI)

Definition: This is based on a sampling of the prices for hundreds of goods and services in a given “market basket.” These prices used as a measure of inflation.

Recent Data Point for CPI

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Up 0.4% in April of 2016

Graph of Recent CPI Trends

CPI FOR ALL URBAN CONSUMERS: ONE MONTH PERCENT CHANGES,
JANUARY 2014 TO APRIL 2016

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Producer Price Index (PPI)

Definition: The Producer Price Index (PPI) is a weighted index of prices measured at the wholesale or producer level. Like the CPI, it is used as an indicator of inflation, except it may catch inflation (or deflation) earlier in the market process.

Recent Data Point for PPI

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Up 0.2% in April of 2016 (preliminary data)

Graph of Recent PPI Trends

PPI FOR COMMODITIES: ONE MONTH PERCENT CHANGE,
JANUARY 2014 to APRIL 2016

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Consumer Confidence Index

Definition: This is leading indicator of consumer spending. The idea is that consumers are more likely to spend when they are more confidend about their economic prospects. Unlike most of the other economic indicators listed here, this one is not governmental but, rather, from a Nielsen survey conducted on behalf of the Conference Board.

Recent Data Point for CCI

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Index is 92.6 points in May, down from 94.7 in April
(1985=100)

Because the Confidence Board sells the historical data rather than provides it freely like the other indicators listed in this article, a graphic of historical data is not displayed here. Some experts also use the University of Michigan’s Index of Consumer Sentiment.

Current Employment Statistics (CES)

Definition: This is based on a survey of about 146,000 business and government agencies. It produces a range of different types of data rather than a single data point. The data includes:

  • Change in Total Nonfarm Payroll Employment
  • Change in Total Private Average Hourly Earnings for All Employees
  • Change in Total Private Average Weekly Hours for All Employees
  • Percent Change in Total Private Aggregate Weekly Hours for All Employees
  • Change in Manufacturing Average Weekly Hours for All Employees
  • Change in Manufacturing Average Weekly Overtime for All Employees
  • Change in Private Real Average Hourly Earnings for All Employees

The most widely cited data from the CES is probably the change in nonfarm employment. This data point is shown below:

Recent Data Point for Payroll Employment

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+38,000 (preliminary data) in May 2016

 Graph of Recent Trends

ONE MONTH NET CHANGES IN U.S. TOTAL NONFARM PAYROLL EMPLOYMENT

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Retail Trade Sales and Food Services Sales

Definition: This measures consumers’ consumption across retail industries. This consumption makes up about two-thirds of the annual GDP in the U.S. The data can be used to gauge both the direction and magnitude of spending trends.

Recent Data Point for Retail Trade and Food Services Sales

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Up 1.3% in April 2016

Graph of Recent Trends

MONTHLY PERCENT CHANGE IN RETAIL AND FOOD SERVICE SALES SEASONALLY ADJUSTED,
JANUARY 2014 to APRIL 2016

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Home Sales

Definition: Home sales are a reflection of consumer sentiment because they represent a major purchase for most people.

Recent Data Point for Home Sales

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619,000 in April 2016, 16% above March rate of 531,000

Graph of Recent Trends

NEW HOUSES SOLD AND ON SALE
(in thousands)

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Manufacturing and Trade Inventories and Sales

Definition: This contains information on business inventories and sales. Growth in inventories might mean sales are slow, thereby indicating that the economy’s overall growth may be slowing. If inventories are high and sales are low, the inventories/sales ratio climbs. This indicates slower growth. If inventories are relatively low and sales high, however, the ratio declines, which can be a sign of economic growth.

Recent Data Point  for Manufacturing and Trade
Inventories and Sales Ratio

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Ratio of 1.4 in April 2016, Seasonally Adjusted


Graph of Recent Trends

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Standard & Poor’s 500 Index (aka, S&P 500)

Definition: The S&P 500 is a U.S. stock index based on the market capitalizations for 500 large companies. It is used as a bellwether for the economy as a whole.

Recent Data Point for S&P 500 Index

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Change from June 14, 2015 to June 14, 2016: -0.9

Graph of Recent Trends

PERFORMANCE OF S&P INDEX OVER ONE YEAR

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Philadelphia Federal Reserve’s Index of Manufacturing

Definition: This is based on the Manufacturing Business Outlook Survey, a monthly survey of manufacturers in the Third Federal Reserve District. Participants indicate the direction of change in overall business activity and in the various measures of activity at their plants: employment, working hours, new and unfilled orders, shipments, inventories, delivery times, prices paid, and prices received. Recent research indicates that, at least historically, the index has been very useful for forecasting economic growth or declines.

There are two primary data points worth focusing on. Both are diffusion indices, which means they represent the percentage of survey respondents indicating an increase in business activity minus the percentage indicating a decrease in business activity. The result is a diffusion index based on the current environment and an index based on a forecast of how things will look in six months.

The diffusion index for May 1016 was -1.8, which means survey participants were slightly more likely to say that general business activity had decreased rather than increased. However, the situation is different when respondents look six months into the future. In that case, the diffusion index is 36.1, an indicator that most respondents are optimistic that future business activity will increase.

Recent Data Point for Philadelphia Federal Reserve’s
Diffusion Index of Manufacturing

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Forecast for Six Months from May 2016: 36.1

Graph of Recent Trends

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Quick Summary of the Indicators

  1. GDP was up 0.8% in first quarter of 2016
  2. CPI was up 0.4% in April of 2016
  3. PPI was up 0.2% in April of 2016 (prelim data)
  4. CCI was 92.6 in May, down from 94.7 in April
  5. Nonfarm Payroll Employment was up 38,000 (prelim data)
  6. Retail Trade Sales and Food Services Sales were up 1.3% in April 2016
  7. Home Sales were at 619,000 in April, 16% above the March number
  8. The Manufacturing and Trade Inventories and Sales ratio was 1.4 in April 2016
  9. The S&P 500 Index was down 0.9% from one year before
  10. The Philadelphia Fed Reserve Diffusion Index looking six months into the future was 36.1

 

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