Main Economic Indicators of the world Essay

Main Economic Indicators of the world

 

Economic indicator refers to statistic about the economy. The main purpose and use of economic indicators is to analyze the economic performance and predict the future performance. Economic indicators have an influence over the country’s currency. In a global scenario the main economic indicators play a role in the investment world and determine the world economy.

Let us now look into the main economic indicators of the world in detail. Gross Domestic Product (GDP) is the annual total value of all the goods and services produced within a country. The economic activity of various countries can be analyzed based on their countries gross domestic product (GDP). There is a recently introduced concept called “GDP density” which is the actual measure of the total amount of economic activity that takes place at different spots on our globe (The distribution of world economy, n.d. Retrieved on May 29, 2007, from: http://www.econbrowser.com/archives/2007/01/the_distributio.html). The GDP density and the gross domestic product (GDP) in general can determine the difference in the incomes of the countries and hence forecast the future of the global economy. Below presented is a graph that depicts the Real GDP of certain nations (Economic indicators, Retrieved on May 29, 2007, from: http://www.rba.gov.au/ChartPack/economic_indicators.pdf).

Balance of payments is another economic indicator that measures the payments in financial capital that flow between the nations. A country is said to have a positive balance of payment if it receives more money as payment in comparison with the payment it makes to other countries. The vice versa gives the definition of a negative balance of payment.

The cross border payments include money transacted in current accounts, payments made for the purchase and sales of goods and services, stocks, bonds, and foreign direct investments. (Main economic indicators of the world, n.d., Retrieved on May 29, 2007, from: http://www.fxstreet.com/education/fundamental/main-economic-indicators-of-the-world/2006-06-15.html).

Here current account is in itself an essential economic indicator that highlights the business transactions on a day today basis. It reflects international payments and receipts for trading and services, royalties, and also indicates aspects regarding the foreign employees such as repatriation of after-tax profits and dividends, remittance of after-tax wages and other income and also payment of interest on foreign debts. (Main economic indicators of the world, n.d., Retrieved on May 29, 2007, from: http://www.fxstreet.com/education/fundamental/main-economic-indicators-of-the-world/2006-06-15.html).

A graph in this context can clearly spell out the use of current account as a global economic indicator. (Economic indicators, Retrieved on May 29, 2007, from:

http://www.rba.gov.au/ChartPack/economic_indicators.pdf)

In any given economy the sum of money earned by selling exports minus money spent on buying imports gives the balance of trade. It is an important part of the balance of payment. A positive balance of trade is known as “Trade Surplus” and a negative balance of trade is known as a “Trade Deficit”. (Main economic indicators of the world, n.d., Retrieved on May 29, 2007, from: http://www.fxstreet.com/education/fundamental/main-economic-indicators-of-the-world/2006-06-15.html).

In the same context of exchanging money across the border capital account is also a primary component of balance of trade. It can be called a summary of country’s international borrowing and lending.

Buying and selling are two major activities in any economy and consumer is the most essential element to initiate any economic activity. The consumer price index (CPI) is a measure of the “average change in retail prices for a fixed market basket of goods ands services” (Main economic indicators of the world, n.d., Retrieved on May 29, 2007, from: http://www.fxstreet.com/education/fundamental/main-economic-indicators-of-the-world/2006-06-15.html). Consumer price index (CPI) is widely used to measure inflation in an economy, which is the rate at which the prices of goods are increasing in the market. As the prices increase the purchasing powers of consumers decreases.

A high inflation is not very advisable for the economy. Consumer price index (CPI) as an economic indicator covers a diverse range of products and services; the consumer price index (CPI) figures are very accurate and efficiently help investors in analyzing the current economy and in making some future forecasts.

Very closely knitted with the consumer price index (CPI) and inflation is another indicator – The consumer confidence index (CCI). Consumer confidence index (CCI) deals more with the emotional aspect of a consumer. If an economy presents more jobs and there is plenty of money in the pockets of the consumers as earnings then a consumer will present better spending ability. On the whole we can say that consumer price is a very important economic indicator. The graph below can very well strengthen the idea of consumer price as a main economic indicator of the world (Economic indicators, Retrieved on May 29, 2007, from: http://www.rba.gov.au/ChartPack/economic_indicators.pdf).

The wheels that run any economy largely depends on the purchasing powers of its consumers which is directly dependent on the employment opportunities in an economy. The economic indicators that depend on the concept of employment are discussed below in detail.

The employment cost index, which provides extremely comprehensive statistics regarding the worker compensations and inflation is a major indicator. Unemployment rate is yet another indicator which is the percentage of suitable civilian force constantly in the outlook for employment but unable to find jobs. Gathering statistic regarding employment can act as a powerful tool to establish insight into “wage inflation” and “wage trends”. This data helps investors to sense the job market better. High wage inflation indicates a fall in stock and bond prices (Main economic indicators of the world, n.d., Retrieved on May 29, 2007, from: http://www.fxstreet.com/education/fundamental/main-economic-indicators-of-the-world/2006-06-15.html). Graph below describes the unemployment rate in certain countries. The graph clearly presents the fact that across the world the problem of unemployment has decreased which is a good sign for the growth of the global economy. (Economic indicators, Retrieved on May 29, 2007, from: http://www.rba.gov.au/ChartPack/economic_indicators.pdf)

 

Manufacturing of goods is the key to economic growth. Industries, plants and mines are the largest producers of goods in any nation, industrial production is the total output produced by all of them. This indicator is fundamentally important as it highlights the strength of the currency of that nation. Capacity utilization is another indicator in this sector; it refers to the maximum output a plant can produce in normal business condition. Mathematically it is the total industrial output divided by total production capability. A high utilization capacity statistic indicates an approaching inflation and expectation in the foreign exchange market will be for an increased interest rate that will slow the cross border investments in turn. The scope of manufacturing includes several other indicators like the durable goods orders that consist of products with life span of more than three years. This data is fairly important because the higher the number it only indicates the foreign exchange markets that consumers are in a better position to spend on these goods as they are more durable. This indicates good consumer confidence. (Main economic indicators of the world, n.d., Retrieved on May 29, 2007, from: http://www.fxstreet.com/education/fundamental/main-economic-indicators-of-the-world/2006-06-15.html).

The graph below presents Asia’s industrial production; a closer examination of the graph clearly indicates that china has the highest industrial production in comparison with the other Asian countries (Economic indicators, Retrieved on May 29, 2007, from:

http://www.rba.gov.au/ChartPack/economic_indicators.pdf)

There are several other economic indicators related to production of goods in a country. Productivity with reference to the manufacturing of goods is “a measure of efficiency summarizing the value of outputs relative to the value of inputs” (Main economic indicators of the world, n.d., Retrieved on May 29, 2007, from: http://www.fxstreet.com/education/fundamental/main-economic-indicators-of-the-world/2006-06-15.html). Producer price index (PPI) measures the average changes in selling prices received by domestic producers for their output.

There are numerous publications by various national and international bodies that are used as economic indicators to forecast the global economy. Some of them are listed here: Beige Book Fed Survey (Officially known as the Survey on Current Economic Conditions), Business Inventories and Sales, ISM manufacturing index, IMS service index, Tankan Survey (A Japanese economy survey conducted by the Japanese government).

The efforts of the various international bodies such as the World Bank, the World Trade Organization and the International Monetary Fund has created a good understanding among the different countries across the world, which in turn has led to a great success in the global scenario. The statistical data gathered from various world economic indicators are a real reflection of the present world economy and certainly throw light on its future.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

References

Main economic indicators of the world, Retrieved on May 29, 2007, from:

http://www.fxstreet.com/education/fundamental/main-economic-indicators-of-the-world/2006-06-15.html

Economic indicators, Retrieved on May 29, 2007, from:

http://www.rba.gov.au/ChartPack/economic_indicators.pdf

The distribution of world economy, Retrieved on May 29, 2007, from:

http://www.econbrowser.com/archives/2007/01/the_distributio.html