NAME: SHAMSIYYA UMAR MAGAM

REG No: 9203167

COURSE:PRINCIPLES OF MANAGEMENT 1 (EA111)

ASSIGNMENT: 2

ABSTRACT ABOUT THE ECONOMIC INDICATORS

Economic indicators (or business indicators) are statistics or data from the

study of 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, which refer to economy-wide fluctuations in production or

economic activities over several months or years

Economic indicators include various indices, earnings, reports and economic

summaries. Examples are: unemployment rate, housing starts, Consumer Price

Index (a measure for inflation), Consumer Leverage Ratio, Industrial production,

bankruptcy, Gross Domestic Product (GDP), Broadband Internet Penetration, retail

sales, Stock Market prices, Money Supply Charges, e.t.c.

Economic indicators can be classified into three categories according to their

usual timing in relation to the business cycle. They are:

LEADING INDICATORS: They are indicators that usually change before the

economy as a whole changes. They are therefore useful as short term

predictors of the economy. Stock Market Returns are examples of leading

indicators, the stock market usually begins to decline before the economy as

a whole declines and also begins to improve before the general economy

begins to recover from a slump.

LAGGING INDICATORS: They are indicators that usually change after the economy

as a whole does. Typically, the lag is a few quarters of a year. The

unemployment rate is a lagging indicator because employment tends to

increase two or three quarters after an upturn in the general economy.

COINCIDENT INDICATORS: They are indicators which change approximately the

same time as the whole economy, thereby providing information about the

current state of the economy. Personal Income, Gross Domestic Product

(GDP), Industrial Production and Retail Sales are coincident indicators. A

coincident index may be used to identify the dates of peaks and troughs in the

business cycle, after the facts.

There are also three terms that describe an economic indicator's direction,

relative to the direction of the general economy. They are:-

a) Procyclic indicators are indicators which move in the same direction as the

general economy; they increase when the economy is doing well and decrease

when it is doing badly, e.g. Gross Domestic Product (GDP).

b) Countercyclic indicators are indicators which move in the opposite

direction of the general economy. They increase as the general economy

decreases and vice-versa, e.g. unemployment.

c) Acyclic indicators are indicators which have little or no correlation

(connection) to the business cycle. They may rise or fall when the economy is

doing well or not.