The GDP of a country shows the amount of goods and services it produces within a particular year or through the four consecutive quarters of a given business period. GDP is an important indicator of how healthy the current economy is since it shows how much is being produced (McConnell 548). If the country has a lower GDP as compared to last year, then the economy is shrinking; however, if it is higher than last year then this is a good indicator that it is expanding and improving.
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The economy as we know it today hinges on consumer spending; the more consumers spend within a given business year, the healthier the economy is since this improves the amount of monetary liquidity that is available within the market. Low consumer spending was actually one of the reasons why the 2007 financial crisis became as bad as it was since a sudden decline in the amount of goods bought had dire repercussions for multiple industries (Schneider, Sögner and Veža 1540).
Another good indicator of the health of the economy is the level of employment within the country. High levels of employment is a good indicator of potentially greater consumer spending since people will have the money to spend. On the other hand, high levels of unemployment can result in low consumer spending which can have a debilitating impact on the economy.
The housing market has always been a good indicator of the current state of the economy since a large number of people buying homes is indicative of them having more disposable assets. Not only that, there are numerous periphery industries which are influenced by the housing market and, as such, the more houses bought the greater the amount of business these industries receive (Blinder 135).
Connected to consumer spending, industrial production refers to the amount of goods produced for businesses and consumers. High industrial productive numbers is indicative of a healthy economy due to the amount of monetary resources needed to purchase industrial products.
Retail and Food Service Statistics
As mentioned earlier, consumer spending is an essential indicator of the health of an economy with retail and food service statistics often acting as supplementary data for consumer spending indexes. The higher the retail and food service data that is shown, the greater the likelihood of good consumer spending numbers.
CPI – Consumer Price Index
The consumer price index helps to track the rate of inflation when it comes to various products that are currently available to consumers. High rates of inflation are indicative of the presence of problems within a country’s economy.
Another good way of gauging the current healthy of the economy is via the S&P Stock Index. The higher the index, the greater the current level of investor activity which is indicative of trust in the economy’s health.
Consumer Confidence Survey
The consumer confidence survey is done annually to examine the current thoughts of consumers regarding their inclination to spend. The greater their inclination, the more likely the economy will improve during the next fiscal year.
Product Price Index
This tracks all good producing sectors and helps to determine if an inflation is on the way based on increases in production costs in particular sectors (ex: crude production).
Blinder, Alan S. “What Did We Learn From The Financial Crisis, The Great Recession, And The Pathetic Recovery?.” Journal Of Economic Education 46.2 (2015): 135.
McConnell, Scott L. B. “WPA For Today: Can The US Afford Economic Recovery?.” Journal Of Economic Issues (M.E. Sharpe Inc.) 48.2 (2014): 541-550.
Schneider, Paul, Leopold Sögner, and Tanja Veža. “The Economic Role Of Jumps And Recovery Rates In The Market For Corporate Default Risk.” Journal Of Financial & Quantitative Analysis 45.6 (2010): 1517-1547.