Economic Indicators Flashcards
What does Gross Domestic Product (GDP) measure?
The total value of all goods and services produced within a country’s borders in a specific time period.
Why is GDP important for investors?
To assess the overall health and growth potential of a country’s economy. A rising GDP often indicates a strong economy and potential investment opportunities.
What does the Consumer Price Index (CPI) measure?
The average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
Why do investors pay attention to CPI?
To gauge inflation. High inflation can erode the purchasing power of money, affecting investment returns and strategies.
How do interest rates impact borrowing and spending?
Higher interest rates generally lead to increased borrowing costs, reducing consumer spending and business investment.
What does the Producer Price Index (PPI) measure?
The Producer Price Index measures the average change over time in the selling prices received by domestic producers for their goods and services.
Why is PPI important for investors?
Investors monitor PPI as it provides insights into inflationary pressures at the producer level. Rising PPI may indicate potential future increases in consumer prices, affecting profit margins for businesses.
Why is Non-Farm Employment Change a key indicator for investors?
Investors closely watch Non-Farm Employment Change as it provides insights into the overall health of the U.S. labor market.
How is PPI different from the Consumer Price Index (CPI)?
While CPI measures the prices paid by consumers, PPI measures the prices received by producers. PPI focuses on the seller’s perspective, reflecting changes in input costs for businesses.
What does the term “Non-Farm Employment Change” refer to?
Non-Farm Employment Change represents the net change in the number of employed people in the U.S., excluding farm workers, government employees, and nonprofit organization employees.
What does JOLTS stand for, and what does it measure?
JOLTS stands for the Job Openings and Labor Turnover Survey. It measures the number of job openings at the end of the month.
Why is the JOLTS Job Openings data important for investors?
JOLTS Job Openings data provides insights into the demand for labor. Investors use this information to assess the health of the job market, potential wage pressures, and overall economic conditions.
How do JOLTS Job Openings relate to unemployment rates?
JOLTS Job Openings complement unemployment rates by offering a forward-looking perspective. A high number of job openings may suggest increased hiring in the future, potentially impacting unemployment rates.
What does the Empire State Manufacturing Index measure?
The Empire State Manufacturing Index is a survey that measures the general business conditions of manufacturers in the New York Federal Reserve district.
How is the Empire State Manufacturing Index calculated, and what does a positive/negative reading indicate?
The index is calculated based on a survey of manufacturers regarding various business conditions. A positive reading suggests expansion, while a negative reading indicates contraction in manufacturing activity.
What does the Conference Board Consumer Confidence Index measure?
The Conference Board Consumer Confidence Index measures the degree of optimism or pessimism of consumers regarding the state of the economy.
How is the Consumer Confidence Index calculated, and what components does it include?
The index is calculated based on consumer responses to surveys about current economic conditions and expectations for the future. Components include present situation index and expectations index.
Why is Consumer Confidence important for investors?
Consumer Confidence is crucial for investors as it reflects consumers’ willingness to spend. High confidence often leads to increased consumer spending, which can positively impact economic growth and corporate profits.
What is the Federal Funds Rate?
The Federal Funds Rate is the interest rate at which banks lend money to each other overnight in the Federal Reserve funds market.
How does the Federal Reserve influence the Federal Funds Rate?
The Federal Reserve influences the Federal Funds Rate through open market operations, adjusting the supply of money in the banking system to achieve its monetary policy objectives.
Why is the Federal Funds Rate important for investors?
Investors closely monitor the Federal Funds Rate as it serves as a benchmark for many other interest rates, influencing borrowing costs, investment decisions, and overall market conditions.
How can changes in the Federal Funds Rate impact financial markets?
A rate hike may lead to higher borrowing costs, impacting stocks and bonds. A rate cut, on the other hand, may stimulate economic activity and boost asset prices.
What does the term “Core Retail Sales” refer to?
Core Retail Sales represent the total value of retail sales excluding automobile and gasoline sales, providing a more accurate measure of consumer spending trends.
What does Retail Sales measure?
Retail Sales measures the total sales of goods and services by retail establishments, providing a snapshot of consumer spending patterns.
How is the Flash Manufacturing PMI different from the final PMI reading?
The Flash Manufacturing PMI is an initial, preliminary estimate released before the final PMI. It gives an early indication of manufacturing activity, while the final PMI provides a more comprehensive and accurate assessment.
What does the term “Industrial Production” refer to?
Industrial Production measures the output of the industrial sector, including manufacturing, mining, and utilities. It reflects the overall production and capacity utilization in the economy.
